Interactive Investor

Annual home values plunge to a new 14-year low

interactive investor's Myron Jobson comments on the latest Nationwide House Price Index.

1st September 2023 07:43

by Myron Jobson from interactive investor

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Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “It is a case of different month, same headwinds for the housing market. Annual home values plunged to a new 14-year low - down 5.3% in the month of August. The slide in prices looks set to continue as the affordability pressures pushing prices down show persist.

“Traditionally, the third quarter of the year, covering the summer months, builds on the forward momentum in the housing market established in springtime. However, activity has been subdued this year, resulting from high mortgage rates and broader cost-of-living pressures, including climbing rents, which have made it uneconomica for many to buy a home. Many first-time buyers haven’t been able to make the numbers work, and there is also a sense that existing homeowners are delaying their ascension up the property ladder so as not to give up the super low-rate mortgage they secured before rates skyrocketed.

“While any fall in prices is good news for house hunters, it might not be enough to meaningfully offset high mortgage rates. As we enter Q4, the decision to buy or not to buy will hinge on where mortgage interest rates land for many. Inflation is still key to the direction of mortgage rates. Put simply, if inflation continues to move meaningfully lower, this takes the pressure off the Bank of England to continue raising interest rates, so mortgage rates could follow. All eyes are on Bank of England policymakers who are odds-on to press ahead with another interest rate hike. The messaging behind the action will be a crucial moment for the housing market.”

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