UK house prices: Lloyds Bank issues update as it warns of four year decline
An image of for sale and sold signs
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Lloyds Banking Group has issued a half-year update on house prices and altered its assumptions on growth.
The financial services company expects average house prices to drop this year.
The base case scenario forecasts a decline of 5.4 per cent.
December’s prediction was slightly more pessimistic at 6.9 per cent.
Signage outside the Lloyds Banking Group head offices in London
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Lloyd’s most severe downside would see prices drop by 9.3 per cent.
However, the bank predicted a 14.8 per cent drop under the same scenario six months ago.
A probable scenario would result in 5.6 per cent drop this year.
But the decline will likely balance out across the next four years, with an average decline of just 1.1 per cent.
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PALloyds predicted the most probable decline would be 7.7 per cent with average growth over four years of 1.2 per cent in December.
The bank claimed there remains a “potential risk to affordability” due to persistently high levels of inflation and increasing interest rates.
The risk has not been totally accounted for by its credit loss models.
Lloyds said: “This risk is to customers maturing from low fixed rate deals, the building impact on variable rate product holders, lower levels of real household income and rental cover value.”
A branch of Lloyds Bank in the City of London
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His Majesty’s Land Registry recently released the UK’s house price index for May 2023.
It showed house prices have not changed since April but there has been an annual price rise of 1.9 per cent.
The increase took the average property price in the United Kingdom to £285,861.
Annual house price inflation was highest in the North East of England at four per cent in the 12 months to May 2023.
The East of England witnessed the lowest annual growth over the same period.