UK house price growth slows as interest rates tighten

UK house price growth slowed in September, with the average cost of a home slipping from an all-time high as rising borrowing costs reduced affordability, mortgage provider Halifax said.

Prices fell 0.1 percent between August and September, dragging the annual growth rate down to 9.9 percent from 11.4 percent in the previous month, the lender said on Friday. The cost of a typical home fell to £293,835 from the previous month’s record of £293,992.

House prices have been flat since June, compared with a rise of more than £10,000 in the previous quarter, “suggesting that the property market may already have entered a more sustained phase of slower growth,” said Kim Kinnaird, director at Halifax Mortgages.

Mortgage provider Nationwide also reported this week that house prices flattened in September.

The government’s Sept. 23 tax-cutting tax return prompted many lenders to withdraw mortgage products as expectations grew for a sharp rise in borrowing costs.

Mortgage rates are expected to rise to about 6 percent next year. They have already risen in parallel with the Bank of England’s key interest rate, which at 2.25 percent is the UK’s highest level since 2008.

Many economists expect this will leave many homeowners struggling with mortgage rates and a sharp drop in home prices.

Line chart of average Halifax house price, £, showing UK house prices leveling off following the rise

Most regions reported a slowdown to single-digit increases in annual house prices, Halifax said, with the exception of Wales, where growth remained strong at 14.8 percent.

London still has the slowest annual rate of increase among UK nations and regions, with house prices rising 8.1 per cent.

Kinnaird said stamp duty cuts, a tight supply of homes for sale and a strong labor market would continue to support house prices.

However, he added that “the prospect of further sharp rises in interest rates amid cost-of-living pressures, as well as the affordability impact of higher mortgage borrowing costs in recent weeks, are likely to put more downward pressure on house prices in the months ahead.” UK house price growth slows as interest rates tighten

Adam Bradshaw

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