The Halifax, which is the biggest mortgage lender in the UK, has reported that house prices have experienced their first annual decrease since 2012. The prices have gone down by 1% when compared to the prices of a year ago.
According to the Halifax, which is a part of Lloyds Banking Group, the average cost of houses in May decreased by £3,000 compared to last year and was £7,500 less than the highest point in August.
The organization that provides loans is increasing its mortgage rates and has stated that the rise in borrowing costs is negatively affecting people’s confidence.
In the past few weeks, certain mortgage rates have experienced significant increases.
Lenders are expecting an increase in the Bank of England’s base rate due to inflation staying at higher levels for a longer period than previously expected.
According to Kim Kinnaird, director of Halifax Mortgages, the cooling of housing demand will affect the trust people have in the housing market. Both buyers and sellers will have to adjust their expectations due to this change.
As a result, it is anticipated that the prices of houses will continue to decrease.
According to the Halifax, the typical price of a house in the UK is now £286,532. The report noted that prices had slightly decreased in comparison to the previous month. The fall in prices compared to last year can be attributed largely to the strong market conditions during that time.
According to the report, there was a decrease in prices in the southern region of England, while all other regions, except for Wales, experienced a decrease in the rate of annual price growth.
The Nationwide, a competing lender, has reported a more significant drop in housing prices based on its own data. The Nationwide previously stated that property values had decreased by 3.4% over the year leading up to May, marking the largest decline in 14 years.
First-time homebuyers may appreciate the opportunity, but the current mortgage rates that are higher than anticipated are limiting their ability to make purchases.
Other data indicates that the increasing expenses of daily life might be hindering individuals‘ capacity to save, including setting aside funds for a deposit. UK Finance, an organization representing banks, reported that the sum of money saved in savings accounts with immediate access decreased in the initial quarter of the year, marking the first decrease in 15 years.
Various lenders determine their own assumptions about house prices based on their mortgage data. While these assumptions may differ, the Halifax and the Nationwide are indicating a stagnant market and anticipate a continuation of declining property prices.
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According to Capital Economics analysts, there will be a decrease of 12% in the value of houses measured by Halifax, starting from the highest point recorded in August of last year.
Real estate agents are using the recent decrease in the rate of property price declines as a sign that there may not be significant drops in property values in the future.
According to Tom Bill, who leads residential research at estate agent Knight Frank in the UK, a potential decrease in the housing market will be prevented by various factors. These include an increase in wages, a low unemployment rate, cash sales, high levels of equity in homes, longer mortgage terms, and savings accumulated during the pandemic.
According to him, the UK housing market is returning to normalcy after a period of growth for three years, rather than experiencing a sudden and drastic decline.
The average interest rate for a new fixed-rate mortgage agreement, as stated by Moneyfacts, is 5.79% for a two-year term and 5.47% for a five-year term.
The current interest rates are significantly higher than what they were before December 2021 when the interest rates began to increase, but they are still lower than what they were after the mini-budget of last autumn
New information from UK Finance reveals that a growing number of individuals are choosing longer mortgage terms. A record-breaking 20% of first-time homebuyers are opting for mortgages exceeding 35 years.
According to UK Finance, some customers may be selecting this choice as a way to decrease their monthly payments and increase their ability to afford expenses.
As a result of high inflation and increasing interest rates, the UK economy is facing difficulties.
According to a recent report by the OECD, Britain is expected to outperform Germany in terms of economic growth in 2023. However, the forecast predicts that the UK’s growth rate will be minimal this year, at just 0.3%, before gradually improving to 1% in 2024.
The latest forecast is slightly better than the one made in March. It predicted a decrease of 0.2% for this year, but now it suggests a rise of 0.9% for next year.
In the event that I am unable to make a mortgage payment, what consequences should I expect?
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