The Nationwide House Price Index for December 2023 found that UK house prices fell by 1.8% over the course of 2023, with only Scotland and Northern Ireland seeing rises during the year.
Nationwide’s Chief Economist, Robert Gardner, said “Housing market activity was weak throughout 2023. The total number of transactions has been running at around 10% below pre-pandemic levels over the past six months, with those involving a mortgage down even more (around 20%), reflecting the impact of higher borrowing costs.”
“Housing affordability has remained stretched. A borrower earning the average UK income and buying a typical first-time buyer property with a 20% deposit would have a monthly mortgage payment equivalent to 38% of take-home pay – well above the long run average of 30%.”
The Bank of England has raised interest rates enough to reduce inflation to its target and interest rates are predicted to drop in coming years. This has contributed to the recent drop in the longer-term fixed mortgage rates. This gives a more optimistic outlook for the coming years.
However, Nationwide does not expect activity or house prices to improve rapidly in 2024. It is predicted that income growth, combined with modestly lower house prices and interest rates, will gradually improve affordability over time. Housing market activity is expected to remain fairly subdued in 2024.
They expect that if the economy remains sluggish and mortgage rates moderate only gradually, house prices are likely to record another small decline or remain broadly flat (perhaps 0 to -2%) over the course of the year.
February 23rd, 2024
