Posted on 11 December, 2022

Annual house price growth has slowed, and the latest monthly figures from both Nationwide and Halifax show a fall.

This follows the Bank of England's decision to increase interest rates to 3%, meaning higher mortgage costs for many.

What is happening to house prices?

In the last two years, prices rose steeply - by about a quarter - across most of the UK.

That pace of growth was much faster than was seen after the 2008 global financial crisis, when houses lost about a sixth of their value. It took five years, on average, for prices to recover.

However, prices have now started to slow, with figures from both Nationwide and Halifax showing falls between October and November.

The chart above of annual, rather than monthly, growth shows that year-on-year growth is heading down towards zero.

Nationwide warned the housing market looked set to "remain subdued" in the coming months.

Will house prices fall in the UK?

Monthly changes can be blips, but the UK's largest lender, Lloyds, is planning for an 8% fall next year.

In November, the Office of Budget Responsibility (OBR), which advises the government on the health of the economy - predicted that house prices will drop by 9% over the next two years.

Big jumps in interest rates put pressure on the amount people can afford to offer for houses, and that means less demand.

Mortgage affordability also depends on wider cost-of-living pressures like energy bills, wages and job security. The future of house prices depends on the economy as a whole.

What happens when house prices fall?

The biggest immediate effect is on people who want to move.

Some sellers may decide to delay putting their homes on the market. Homeowners who are considering moving may find they have less money to spend.

There were fewer property sales this year than in the 12 months leading up to last summer's surge in prices before the temporary stamp duty reduction ended.

But if interest rates stay high, an increasing number of people will come off fixed-price mortgages (about 100,000 each month) to new, higher rates.

Some homeowners will find higher these monthly payments unaffordable, making them more likely to sell.

Source: www.bbc.com