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UK house prices slump to 11-year low

house price A woman walks past an estate agent's window in Edinburgh, Scotland February 19, 2009. British gross mortgage lending fell 52 percent on the year in January to its lowest monthly total since April 2001, the Council of Mortgage Lenders said on Thursday.    REUTERS/David Moir   (BRITAIN)
The average UK house price fell to £257,406 in February from a peak of £273,751 in August. Photo: David Moir/Reuters (David Moir / reuters)

UK house prices fell by 1.1% in the year to February, as inflation and higher mortgage rates hit prospective buyers.

Across the UK, the average house price was £257,406 in February, Nationwide Building Society said.

It is the weakest rate since November 2012. In January, the annual rate showed 1.1% growth.

Prices fell 0.5% compared with January, following a 0.6% drop the month before. It was the sixth monthly decline in a row, and left prices 3.7% below their £273,751 peak in August.

February’s negative annual price growth of 1.1% was the weakest seen since November 2012, Nationwide added.

Robert Gardner, Nationwide’s chief economist, said: “Annual house price growth slipped into negative territory for the first time since June 2020, with prices down 1.1% in February compared with the same month last year.

Read more: UK house prices being cut by £14k to make a sale

“Moreover, February saw a further monthly price fall – the sixth in a row – which leaves prices 3.7% below their August peak – after taking account of seasonal effects.

“The recent run of weak house price data began with the financial market turbulence in response to the mini-budget at the end of September last year. While financial market conditions normalised some time ago, housing market activity has remained subdued.

“This likely reflects the lingering impact on confidence as well as the cumulative impact of the financial pressures that have been weighing on households for some time.

“Indeed, inflation has continued to outpace wage growth and mortgage rates remain significantly higher than the lows recorded in 2021.”

The Bank of England has been hiking interest rates since late 2021 in order to tackle double-digit inflation and the mortgage market suffered major disruption in late September and October following former prime minister Liz Truss's "mini budget", which pushed up market borrowing costs.

Victoria Scholar, head of investment at Interactive Investor, said: “The housing market is struggling under the weight of lacklustre economic growth, a softening consumer, falling real wages, and rising mortgage rates as the Bank of England continues to raise rates. Potential homeowners appear to be holding off in anticipation that mortgage rates and house prices will cool later this year. Stemming an even steeper slide is the chronic shortage of housing supply in the UK.

“According to Zoopla, UK home sellers have had to cut £14,000 from their asking prices on average with 40% of properties having to lower their price online in order to attract buyers. However looking longer term, data from Halifax indicated that over three years from January 2020 to December 2022, house prices have risen by just over 20%, with particular strength for larger properties outside of busy urban areas after the pandemic saw many house buyers hunt for more space for a working from home office as well as a garden. Meanwhile urban areas have struggled with flats in London climbing the least.”

Read more: Supermarket value ranges soar in price with milk and cheese 20% more expensive

Gabriella Dickens, senior UK economist at Pantheon Macroeconomics said: “Looking ahead, we still expect house prices to fall over the coming months until they are about 8% below their peak.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Swap rates, which underpin the pricing of fixed-rate mortgages, and have been falling since the turmoil created by the mini-budget in September, have taken a turn and moved the other way in the past couple of weeks on the back of expectations of further base rate rises.

“Subsequently, several lenders who launched sub-4% five-year fixed-rate mortgages have since increased these, with mortgage rates likely to be up and down in coming weeks.”

Watch: How much money do I need to buy a house?

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