British housing prices experience yearly decline, first in 11 years

According to Halifax, a mortgage lender, British housing prices experienced a yearly decline in May, marking the first drop in 11 years. This decrease can be attributed to the impact of increasing interest rates on the housing market. The average property price fell by 1.0% compared to May of the previous year, which is consistent with the predictions made in a Reuters survey. This decline represents the first year-on-year decrease since December 2012. In terms of monthly changes, prices remained stable in May, maintaining the same level as in April, when they experienced a 0.4% decline.

Kim Kinnaird, the director of mortgages at Halifax, mentioned that there was a decline in demand and anticipated that the housing prices would face additional pressure due to the increase in interest rates.

Following the announcement of unfunded tax cuts by former Prime Minister Liz Truss, which caused disruption in financial markets, the housing market in Britain showed some signs of recovery in early 2023. This recovery came after a period of weakness towards the end of the previous year.

According to Kinnaird, the temporary improvement observed in the housing market during the first quarter has diminished. The impact of higher interest rates is gradually affecting household budgets, especially for those whose fixed-rate mortgage agreements are expiring.

Separate data from UK Finance indicated that lending to first-time homebuyers in the three months leading up to March was at its lowest level since the spring of 2020 when the housing market was mostly closed due to the COVID-19 pandemic.

Halifax, which is a division of Lloyds Banking Group, announced its decision to increase the interest rates for its fixed-rate home loans earlier this month. Experts at Capital Economics expressed their belief that these higher rates have the potential to initiate another decline in the housing market in the UK.

Another lender, Nationwide, recently reported a 0.5% decrease in house prices from the previous month in April, as well as a 3.4% decline on an annual basis. This annual drop represents the largest decrease since 2009.

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British housing prices experience yearly decline, first in 11 years

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