UK house prices fall 1.8% YoY in December on higher mortgage rates
UK house prices fell by a higher-than-expected 1.8% year on year in December, mortgage lender Nationwide said on Friday, as higher borrowing costs and deposit requirements deterred buyers.
Expectations were for a 1.4% fall. Prices remained flat on a monthly basis. and Nationwide said a rapid rebound in activity or house prices in 2024 "appears unlikely" as wage growth lagged behind inflation.
"Housing market activity was weak throughout 2023," said Nationwide chief economist Robert Gardner.
"The total number of transactions has been running at (about) 10% below pre-pandemic levels over the past six months, with those involving a mortgage down even more (about 20%), reflecting the impact of higher borrowing costs," he added.
On a monthly basis, the average house price slipped to £257,443, down from £258,557 in November.
“Even though house prices are modestly lower and incomes have been rising strongly, at least in cash terms, this hasn’t been enough to offset the impact of higher mortgage rates, which in recent months were still more than three times the record lows prevailing in 2021 in the wake of the pandemic," Gardner said.
He added that a borrower earning the average UK income and buying a typical first-time buyer property with a 20% deposit would have a monthly mortgage payment equivalent to 38% of take-home pay – well above the long run average of 30%.
“At the same time, deposit requirements remain prohibitively high for many of those wanting to buy – a 20% deposit on a typical first-time buyer home equates to c105% of average annual gross income – down from the all-time high of 116% recorded in 2022, but still close to the pre-financial crisis level of 108%."
Reporting by Frank Prenesti for Sharecast.com