Bigger-than-expected fall in house prices

Business

House prices fell by 5.3% in the year to August – a bigger-than-expected drop, according to Nationwide.

The lender’s figures were released as interest rate hikes by the Bank of England to tackle inflation send mortgage payments higher – as well as rental costs.

Additional housing bills are piling more misery on families at a time when the main measure of inflation is easing back from the highs of last winter, when unprecedented energy costs hit Western economies.

The evolving cost of living crisis has squeezed affordability and demand at estate agents – and the Bank wants a wider economic slowdown to help cool the pace of price rises.

Data released by the Bank earlier this week showed that mortgage approvals had dropped by almost 10% last month.

Separate figures from property website Zoopla suggested that the UK was on track for about one million house and flat sales by the end of this year – the lowest level since 2012.

The slump in activity reflects not only the Bank’s hikes to the cost of borrowing, but also poor confidence over the outlook.

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Average rates for two and five-year fixed residential mortgages remain above 6%.

Higher funding costs for lenders are down to expectations the Bank of England still has some way to go in its battle against inflation.

Financial markets currently expect the Bank’s rate to peak just shy of 6% early next year – from its current level of 5.25%.

Nationwide, like other mortgage lenders in the shifting rate environment, revealed on Thursday that it was reducing some fixed and tracker products by up to 0.15 percentage points from today.

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