The Halifax, the largest mortgage lender in the UK, has reported that house prices have experienced a decline of 1% in comparison to the previous year. This marks the first annual decrease in house prices since 2012, indicating a significant shift in the housing market.

According to the Halifax, which is a part of the Lloyds Banking Group, the average price of houses in May decreased by £3,000 compared to the same time last year. Additionally, the prices were £7,500 lower than their highest point in August.

The financial institution, which is currently increasing the interest rates for its mortgages, stated that the rise in borrowing expenses was negatively impacting people’s trust in borrowing

In the past few weeks, certain mortgage rates have experienced a significant increase.

Lenders are expecting an increase in the Bank of England’s base rate due to the fact that inflation rates are expected to stay high for a longer period than previously predicted. This prediction is based on the general rise in prices of goods and services.

According to Kim Kinnaird, who is the director of Halifax Mortgages, the housing market will experience a decrease in confidence due to the adjustment of expectations by both buyers and sellers. Kinnaird also mentioned that there is a cooling trend in the demand for housing.

As a result, it is anticipated that the prices of houses will continue to decrease.

According to the Halifax, the typical cost of a home in the United Kingdom is currently at £286,532. The report indicated that there has been a slight decrease in prices in comparison to the previous month. The report also highlighted that the decrease in prices over the past year could be attributed to a strong market performance during that time.

According to the report, there has been a decline in prices in the southern region of England. The report also mentioned that the rate of price growth has slowed down in all regions except Wales.

The Nationwide, a competing lender, has reported a more significant drop in house prices based on its own data. It previously stated that property values decreased by 3.4% in the past year until May, representing the largest decline in 14 years.

First-time homebuyers may appreciate the situation, but the current mortgage rates that are higher than anticipated are limiting their ability to make purchases.

According to different data, the increasing expenses are possibly decreasing the capacity of individuals to save, including the ability to save for a deposit. UK Finance, an organization that represents banks, reported that the amount of money saved in instant access savings accounts decreased during the first quarter of the year, marking the first decline in 15 years.

Various lenders have unique criteria for estimating house prices, primarily based on their mortgage records. While there may be some differences, the Halifax and the Nationwide have both indicated a slowed market and the possibility of continued decreases in property values.

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According to analysts from Capital Economics, it is predicted that there will be a decrease of 12% in house prices measured by Halifax from the highest point seen in August of the previous year.

Estate agents are using the decreasing rate of price drops in the past month as an indication that property worth may not decline significantly more.

According to Tom Bill, who is in charge of researching UK residential property for estate agent Knight Frank, any decrease in the property market will be balanced out by increasing salaries, a low rate of joblessness, cash transactions, historically high levels of home equity, longer mortgage terms and savings accumulated during the pandemic.

According to him, the UK housing market is gradually stabilizing after three years of growth, rather than experiencing a sudden decline.

Moneyfacts has provided data which shows that the average interest rate for a new fixed-rate mortgage agreement is 5.79% for a two-year term and 5.47% for a five-year term.

The current interest rates have increased significantly compared to their levels before December 2021. However, they are still lower than the rates that followed the mini-budget of last autumn.

Recent data from UK Finance reveals that there has been a rise in the number of people choosing to take out long-term mortgages. The figures show that a significant portion of first-time home buyers, about 20%, have opted for mortgages that exceed a 35-year repayment period.

According to UK Finance, customers may be selecting this alternative to decrease their monthly payments and, as a result, improve their capability to afford it.

The UK economy is facing challenges due to the effects of high inflation and increasing interest rates.

A recent study conducted by the OECD indicates that only Germany among developed economies is expected to have a weaker performance than Britain in 2023. The think tank predicts that the UK’s economic growth will increase by a mere 0.3% this year, followed by a moderate improvement to 1% in 2024.

The current forecast is slightly better than the previous prediction made in March, which estimated a decrease of 0.2% this year and an increase of 0.9% next year.

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