UK house prices post biggest annual drop since 2011: Halifax

UK house prices post biggest annual drop since 2011: Halifax

UK house prices experienced a 2.6% year-on-year decline in June, marking the largest annual drop since June 2011, according to mortgage lender Halifax. The falling prices were particularly pronounced in London, where they fell at the fastest pace since 2009. Halifax also noted that the soaring mortgage rates indicate further weakness in the housing market.

In May, house prices had already fallen by 1.1%, and this downward trend continued into June with a 0.1% decrease. Kim Kinnaird, director of Halifax Mortgages, explained that the significant annual drop was due to the comparison with the peak in house prices seen around a year ago, as prices have remained relatively stable in recent months.

However, the rising mortgage costs, driven by expectations of higher interest rates from the Bank of England in response to inflation, suggest that the housing market will face more challenging times ahead. Kinnaird stated that it is difficult to predict the extent or duration of the downturn in house prices, but falling inflation could provide some support.

With market forecasts indicating a peak in the Bank Rate of over 6%, it is likely that mortgage rates will remain elevated for an extended period, putting continued pressure on household finances. Investors are betting that stubborn inflation will lead the Bank of England to raise interest rates to a 25-year high of 6.5% by December.

Lenders, including Halifax and other major banks like Lloyds Bank, have been adjusting their home loan offerings in response to the soaring funding costs. This scramble to keep up with rising costs reflects the expectation of a slowdown in housing market activity.

Historical data shows that significant increases in swap rates, which influence mortgage funding costs, often precede substantial declines in housing starts. Halifax highlighted that the largest drop in house prices occurred in the south east of England, while in London, prices fell by 2.6% year-on-year, the sharpest decline since October 2009.

In conclusion, the latest data from Halifax indicates a significant decline in UK house prices, with London experiencing the most pronounced drop. The surge in mortgage rates suggests that the housing market will face further challenges in the coming months.

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