The Halifax, the biggest mortgage lender in the UK, has reported that house prices have experienced a 1% decline compared to last year. This marks the first annual decrease of its kind since 2012.
According to Halifax, which is a part of Lloyds Banking Group, the average cost of houses in May decreased by £3,000 compared to the previous year and £7,500 lower than their highest point in August.
The borrowing institution, which is increasing its own mortgage rates, stated that the rise in interest rates was causing people to lose faith in the financial system.
In the past few weeks, there has been a significant increase in certain mortgage
Lenders are expecting an increase in the base rate of the Bank of England due to a prolonged duration of inflation, resulting in a general escalation of prices.
According to Kim Kinnaird, who is the director of Halifax Mortgages, the current situation will have an effect on people’s trust in the housing market as both buyers and sellers will have to modify their expectations. Kinnaird also mentioned that the demand for housing is decreasing.
As a result, there is still an anticipation of house prices continuing to decrease.
According to the Halifax, the typical cost of a house in the UK is now £286,532. Although prices have slightly decreased in comparison to the previous month, the market was strong last year and that has contributed to the decline in prices from the previous year.
According to the report, the prices in the southern region of England have decreased while all other areas, except for Wales, have experienced a decline in the yearly growth rate of prices.
According to data from the Nationwide, a competing lender, there has been an even greater decrease in house prices. The data revealed that over the course of the year leading up to May, property values dropped by 3.4%. This decline marks the largest drop in 14 years.
First-time home buyers may be happy about a potential decrease in home prices, but the current high mortgage rates are making it difficult for them to afford a home.
Data also indicates that the increasing expenses of daily life may be hindering individuals‘ capacity to save, including setting aside funds for a down payment. UK Finance, an organization representing banks, reported that the quantity of money saved in readily accessible savings accounts dropped during the first quarter of the year, marking the initial decline in 15 years.
Lenders have their own mortgage data, which they use to make assumptions about house prices. The Halifax and Nationwide lenders both agree that the market is stagnant and predict that property prices will continue to fall. However, these assumptions may vary depending on the lender.
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According to predictions made by analysts working at Capital Economics, there will be a decrease of 12% in the prices of houses as per the Halifax metric, from the highest point recorded in August of the previous year.
Real estate agents have indicated that the recent slowdown in the rate of price drops could suggest that property values may have reached their lowest point and are unlikely to decrease significantly further.
According to Tom Bill, who is in charge of residential research in the UK for estate agent Knight Frank, even if the housing market experiences a decline, there are various factors that would prevent it from being too severe. These factors include increasing wages, low levels of unemployment, cash transactions, a record amount of equity in housing, longer mortgage terms, and savings that people have accumulated
According to him, the UK’s housing market is gradually stabilizing after a period of steady growth instead of experiencing a sudden and drastic decline.
Moneyfacts has released data indicating that the average interest rate for a new fixed-rate mortgage agreement is 5.79% for a two-year contract and 5.47% for a five-year contract.
The current interest rates are significantly higher than their previous levels before the rise in December 2021, but they still remain lower than what they were after the mini-budget of last autumn.
New information from UK Finance reveals that individuals are choosing to take out mortgages over longer repayment periods. A historic 20% of first-time home buyers have opted for mortgages that span over 35 years.
According to UK Finance, some customers might be selecting this alternative to decrease their monthly payments and enhance their affordability calculations.
The UK economy is facing challenges due to the effects of increased inflation and interest rates.
According to the OECD’s recent analysis, Britain’s economic performance will be better than all other developed countries except Germany in 2023. The think tank predicts that the UK’s growth rate will increase by only 0.3% this year, but it will improve to 1% in 2024.
The latest forecast shows a small improvement compared to the previous one made in March. It predicts a decrease of 0.2% for this year, but predicts an increase of 0.9% for the next year.
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