Rapid Decrease in House Prices Over 10 Years - Historic Low Point Reached
In a recent announcement, UK bank Halifax reported a 2.6% decline in house prices, marking the biggest decrease since 2011. This equates to around £7,500 being wiped off the average UK house price, now standing at £285,932.
Kim Kinnaird, Halifax's director of mortgages, explained that the high house prices last summer, supported by the temporary Stamp Duty cut, significantly impacted the current rate of decline. The lender stated that the house price drop should be viewed in the context of a market that had little movement in prices recently.
The squeeze on household finances is expected to continue to put downward pressure on house prices over the coming year. Ms. Kinnaird also mentioned that the resulting squeeze on affordability will inevitably act as a brake on demand. This suggests that mortgage rates will remain higher for an extended period.
Activity on homes has become stagnant, with 74,360 transactions in May, marking a 25% drop compared to the same month the previous year. The volume of mortgage applications held up well throughout June, particularly from first-time buyers.
The latest data on transactions comes from HM Revenue and Customs. Core inflation, which excludes energy and food prices, is proving to be stickier than originally expected. Consumer price inflation is expected to decrease in the near term due to potential reversals in energy and food prices.
However, markets are forecasting a peak in Bank Rate above 6%. This could further impact the housing market, as higher interest rates make mortgages more expensive for potential buyers.
The depth and persistence of the downturn in house prices are hard to predict, according to Ms. Kinnaird. The high house prices last summer, combined with the current economic conditions, have created a challenging environment for the housing market.
In conclusion, the UK housing market is experiencing a significant downturn, with house prices dropping and mortgage rates remaining high. The economic conditions and the stagnant market are expected to continue putting pressure on house prices in the coming year.
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