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UK house prices fell by 1.8 per cent during 2023, according to mortgage lender Nationwide, which has forecast a similar decline or stagnation for the year ahead.
Nationwide said on Friday that prices had been flat between November and December, leaving them almost 4.5 per cent below the peak reached in the summer of 2022.
The figures reflect the impact high mortgage rates have had on would-be home buyers, after the Bank of England raised the cost of borrowing from a record low of 0.1 per cent in November 2021 to a 15-year high of 5.25 per cent.
Robert Gardner, Nationwide’s chief economist, said that even with modestly lower prices, the deposit paid by a typical first-time buyer would be 105 per cent of their average annual gross income. Meanwhile their typical monthly mortgage payment would be 38 per cent of take-home pay, well above the long-run average of 30 per cent.
The lender described an increasingly polarised market in which the number of transactions involving a mortgage was a fifth lower than pre-pandemic levels over the past six months, and the number of cash transactions remained above pre-pandemic levels.
Although there had been “encouraging” signs for potential buyers recently, with mortgage rates edging down as investors began to bet on earlier cuts in the BoE’s benchmark rate, “a rapid rebound in activity or house prices in 2024 appears unlikely”, Gardner said.
Instead, Nationwide expects prices to remain flat or decline by up to 2 per cent in 2024, Gardner said, adding: “It appears likely that a combination of solid income growth, together with modestly lower house prices and mortgage rates, will gradually improve affordability over time.”
Scotland and Northern Ireland were the only parts of the UK where prices rose in 2023, Nationwide said, while East Anglia was the weakest region, with prices dropping 5.2 per cent.
