UK house prices record first annual fall in over a decade amid economic downturn
The UK has recorded its first annual contraction in house prices in more than ten years, with a 1% fall in May compared to the same month in the previous year.
The average price of a house in the UK is still higher than it was two years ago and higher than the level recorded at the end of last year.
The price of property boomed over the pandemic, when demand was boosted by the stamp duty tax break and the race for space that followed the expansion of working from home.
The cost of borrowing has increased at its fastest pace in 26 years, with the base interest rate rising 12 times to 4.5%.
Mortgage arrears continue to rise, and total bank deposits fell for the first time in years as households drew on savings built up over the course of the coronavirus lockdowns to help navigate the squeeze on their incomes.
Household spending was resilient at the start of the year as shoppers sought to make the most of shop discounts in January, but their confidence about their personal financial situations remained weak.
According to Capital Economics, house prices were unchanged in May, and the increase in mortgage rates following the bad inflation data published on the 24th of the month is set to tip house prices into a renewed leg down, with forecasts expecting the average quoted mortgage rate to rise from 4.3% in April to 5.7% by the end of the year, with the economy set to enter a recession.
The price of property boomed over the pandemic, when demand was boosted by the stamp duty tax break and the race for space that followed the expansion of working from home.
The cost of borrowing has increased at its fastest pace in 26 years, with the base interest rate rising 12 times to 4.5%.
Mortgage arrears continue to rise, and total bank deposits fell for the first time in years as households drew on savings built up over the course of the coronavirus lockdowns to help navigate the squeeze on their incomes.
Household spending was resilient at the start of the year as shoppers sought to make the most of shop discounts in January, but their confidence about their personal financial situations remained weak.
According to Capital Economics, house prices were unchanged in May, and the increase in mortgage rates following the bad inflation data published on the 24th of the month is set to tip house prices into a renewed leg down, with forecasts expecting the average quoted mortgage rate to rise from 4.3% in April to 5.7% by the end of the year, with the economy set to enter a recession.