House prices have suffered their biggest annual slump since July 2009 as the market struggles to recover from the controversial mini-Budget. Homeowners have witnessed a 3.1 percent year-on-year drop, according to the UK’s biggest building society. The average house was fetching £257,122 in March – 4.6 percent less than the peak last August.
Values also fell by 0.8 percent between February and March, marking the seventh consecutive drop, according to Nationwide.
Demand from buyers is also subdued with mortgage approvals 40 percent below 12 months ago.
Alice Haine, a personal finance analyst at brokers Bestinvest, said the data “cemented the gloom for the property market”.
She said: “The red-hot property market of pandemic days – when buyers snapped up bigger homes in the race for space, aided by temporary stamp duty incentives – is now behind us with buyers and lenders taking a far more conservative approach towards home ownership.”
Daniel Mahoney, UK economist at Handelsbanken, forecast a 10 percent fall in values.
He said: “Latest mortgage approval data from the Bank of England, which is a forward-looking indicator, would suggest that the correction in UK-wide house prices has got some way to go.
“While mortgage approvals ticked up in February, they only registered at 43,500 which is roughly down by about 40 percent on the year.
“The tightening in financial conditions following recent market turbulence is likely to reinforce the current downward trend in prices.
“The peak-to-trough fall in UK house prices could end up being in the region of 10 percent.”
Last September then-Chancellor Kwasi Kwarteng unveiled his tax-cutting mini-Budget.
The promised tax cuts and huge borrowing spooked the markets and mortgage rates soared. The average five-year fixed deal with a 25 percent deposit was 4.4 percent in February, up from 1.8 percent a year ago, according to the Bank of England.
Although some fixed mortgage rates have come down since then, they are still higher than previous levels.
Many people coming to the end of their cheap home loans are having to pay hundreds of pounds more when signing up to a new deal.
Robert Gardner, Nationwide’s chief economist, said the housing market reached a “turning point” last year because of the market turbulence following the mini-Budget, which pushed fixed mortgage rates above six
percent.
He said: “It will be hard for the market to regain much momentum in the near term since consumer confidence remains weak and household budgets remain under pressure from high inflation.
“Housing affordability also remains stretched, where mortgage rates remain well above the lows prevailing at this point last year.”
Prices in Scotland were down 3.1 percent during the three months to March compared with the same period last year.
But in the West Midlands, they were 1.4 percent higher, the lender said.
Figures from the Royal Institution of Chartered Surveyors for February also showed buyer demand falling again for the tenth consecutive month.
