Real estate

Rising interest rates in England triggered falling house prices

Posted by MoneyController on 05.10.2023

The rapid rise in interest rates and the uncertain economic situation are also affecting the UK property market, posing new challenges for UK savers who choose to invest in property.

House prices falling

House prices in the UK are falling, as confirmed by research from Nationwide, which quantified a 5.3 per cent fall in prices. In other words, the average house price has fallen by £14,600 over a one-year period (August 2022-2023). The average house price is now £257,000. However, as Alexa Phillips points out in an article in the Telegraph, the downward price correction could continue in the coming months.

Further downward corrections expected in UK housing market

In this context, Phillips reports on forecasts from Capital Economics and Oxford Economics, which predict an overall downward correction in the housing market of 10.5 per cent and 12.5 per cent respectively. This is largely due to rising mortgage costs. As noted in an article by Jasper Jolly in the Guardian, Nationwide's chief economist Robert Gardner explained that for those on average salaries, the cost of mortgage finance has risen from 29% to 38% of salary.

House prices falling at different rates in different regions

As Jolly's article points out, the increase in costs has led to a reduction in the number of mortgages being granted: according to Bank of England data, this number is estimated to be 30% lower than in 2019. As Jolly also points out, it is interesting to note that the fall in prices has not been uniform across the country: in the South East, for example, house prices have fallen by 6.3%, while in Northern Ireland they have fallen by 1.8%. 

But rents are rising

In terms of rents, data provided by Rightmove shows a 10% increase in prices, taking the monthly average between July and September to just under £1,280. These figures are significantly higher in London, where rents have risen by over 12% to an average of over £2,600 per month. Demand also continues to far outstrip supply, with each rental advert in England now receiving on average three times as many enquiries as in the pre-pandemic period. 

Read also:

Savers on the hunt for opportunities with savings accounts and mortgage renegotiations

Interest rates put pressure on the housing market

European real estate risks crisis, but there are still opportunities for investors

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