UK house prices dip and mortgage approvals slow

Fall of 1.1% year-on-year is the first annual decline since June 2020

The Bank of England also found mortgage approvals had fallen to their lowest since the 2009 financial crisis. PA

House prices fell by 1.1 per cent year-on-year in February, marking the first annual decline since June 2020, according to data from Nationwide.

Across the UK, that means the average house price in February was £257,406. Nationwide also recorded a 0.5 per cent month-on-month price fall.

The building society’s figures came as the Bank of England found mortgage approvals had fallen to their lowest since the 2009 financial crisis, excluding the pandemic when large sections of the property market were closed.

Soaring interest rates and the cost-of-living crisis has cooled activity, the bank said.

Lenders approved 39,637 home loans in January, 2.2 per cent fewer than in the previous month, the Bank of England said on Wednesday.

Nationwide reported the sixth consecutive monthly decline in house prices, with the average value of a home now lower than it was a year earlier.

Prices are 3.7 per cent lower than their August 2022 peak, and February's negative annual price growth was the weakest seen since November 2012, Nationwide added.

“Annual house price growth slipped into negative territory for the first time since June 2020, with prices down 1.1 per cent in February compared with the same month last year,” said Nationwide chief economist Robert Gardner.

“Moreover, February saw a further monthly price fall — the sixth in a row — which leaves prices 3.7 per cent below their August peak — after taking account of seasonal effects.

“The recent run of weak house price data began with the financial market turbulence in response to the mini-budget at the end of September last year. While financial market conditions normalised some time ago, housing market activity has remained subdued.

“This likely reflects the lingering impact on confidence as well as the cumulative impact of the financial pressures that have been weighing on households for some time.

“Indeed, inflation has continued to outpace wage growth and mortgage rates remain significantly higher than the lows recorded in 2021.”

Mr Gardner said it will be hard for the market to regain much momentum in the near-term, with the labour market widely expected to weaken as the economy shrinks in the quarters ahead, while mortgage rates remain above the lows seen in 2021.

Tom Bill, head of UK residential research at estate agent Knight Frank, said: “While most of the economy has moved on from the mini-budget, the hangover is longer for the UK housing market. It has led to a mismatch between the most recent anecdotal evidence and the latest data.

“While last month saw the steepest annual house price decline in more than 10 years, activity has been solid so far this year as buyers and sellers adapt to higher mortgage rates.

“We expect transaction levels to fall from the heights of the pandemic and prices to decline by 5 per cent this year but the UK housing market is far from being on its knees.”