(Updates with graphic, records)
By David Milliken
LONDON, Feb 1 (Reuters) - British house prices dropped
by a bigger-than-expected 0.6% in January and are now 3.2% below
their peak in August, following a surge in borrowing costs and
broader inflation pressures, mortgage lender Nationwide Building
Society said on Wednesday.
January's decline in house prices was the fourth drop in a
row - the longest unbroken run of declines since 2009 - and the
fall was twice the size expected in a Reuters poll of
economists, adding to signs that the market is slowing rapidly.
Prices in the three months to January were down 2.3%
compared with the previous three months, the largest such drop
since the three months to April 2009.
Interest rates have risen sharply since December 2021 and
there was major disruption to the mortgage market in late
September and October following former prime minister Liz
Truss's "mini budget", which sent market interest rates soaring.
"It will be hard for the market to regain much momentum in
the near term as economic headwinds are set to remain strong,
with real earnings likely to fall further and the labour market
widely projected to weaken as the economy shrinks," Nationwide
chief economist Robert Gardner said.
Nationwide forecast in December that house prices would fall
5% in 2023.
House prices in January were 1.1% higher than a year
earlier, Nationwide said, the smallest year-on-year increase
since June 2020 and down from a 2.8% increase in December.
Economists polled by Reuters had expected a rise of 1.9%.
British house prices soared by more than a quarter during
the COVID-19 pandemic, boosted by ultra-low interest rates, tax
incentives and demand for more living space during lockdown
which was seen in other Western countries too.
However, the boom has now gone into reverse, accelerated by
disruption to lending since the mini-budget.
The Bank of England reported on Tuesday that the number of
mortgages approved in December fell to its lowest since the
global financial crisis, excluding the very start of the
COVID-19 pandemic when there were strict lockdown restrictions.
Gardner said this fall reflected a drop in mortgage
applications after the mini-budget, and that it was too soon to
know if the volume of house purchases would recover.
While lenders are now more willing to offer mortgages than
just after the mini-budget, the BoE has steadily raised interest
rates, and is expected to increase its main rate by half a
percentage point to 4% on Thursday, the highest since 2008.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
UK house prices fall by most since 2009 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by David Milliken; Editing by Sarah Young, Sharon
Singleton and Christina Fincher)
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.