The UK property market is falling faster than it has since the Great Financial Crash.
Halifax has said that people can’t afford new homes because mortgage costs have increased.
The UK’s biggest mortgage lender, Halifax, said this week that house prices fell at the fastest yearly rate in 12 years last month.
Halifax says prices fell by 2.6% year-over-year in June, the most significant drop since June 2011; this was the third month in a row that prices went down. The lender said in a statement that the average home price in Britain was £285,932 ($364,320) last month.
The latest drop is due to jitters in the property market caused by rising mortgage rates. These rates are increasing because the Bank of England has raised interest rates several times to fight inflation.
The director of Halifax Mortgages, Kim Kinnaird, said that the “resulting squeeze on affordability will inevitably act as a brake on demand” as buyers think about what they can afford.
Kinnaird says that the cost of funds has increased significantly because of worries about persistent inflation; this, along with the base rate going up by another 0.5 percentage points to 5%, led to a “big jump” in average mortgage rates over the past month.
“Now that the markets are predicting a Bank Rate peak of over 6%, it’s likely that mortgage rates will stay higher for longer, and the squeeze on household finances will keep pushing house prices down over the next year,” he said.
Traders think that the Bank of England will raise rates even more until they reach 6.5% in December; this would be the highest level since 1998. Analysts believe house prices in the UK will fall as much as 10% from their peak in the summer of last year.