Halifax, the British mortgage lender, announced this week that in the UK house prices dropped last month at the fasted annual rate seen in 12 years.
For the third month in a row, June home prices fell, dropping 2.6% year-on-year, following a 1.1% fall in May. According to Halifax, it marked the largest drop seen since June of 2011. Last month the average cost of a home in Britain was £285,932 ($364,320).
The report comes as the housing market has been hit by soaring mortgage rates, triggered by a number of interest rate hikes by the Bank of England, as it has battled with a persistent inflation that set off a cost of living crisis in the nation.
The director of Halifax Mortgages, Kim Kinnaird, said the “resulting squeeze on affordability will inevitably act as a brake on demand” causing buyers to reassess what exactly they are able to afford.
Kinnaird noted that the cost of funding has increased with concerns over persistent inflation and rising rates. That, and the fact the base rate has risen another 50 basis points to 5% has combined to produce a “big jump” over the last month in typical mortgage rates.
He added, “With markets now forecasting a peak in Bank Rate of over 6%, the likelihood is that mortgage rates will remain higher for longer, and the squeeze on household finances will continue to put downward pressure on house prices over the coming year.”
It is expected by traders that the Bank of England will increase rates, reaching 6.5% by December, which would be the highest rate since 1998. Meanwhile, analysts are projecting that the cost of a home will fall as much as 10% from the peak levels seen last summer.
