Falling real estate prices are being exacerbated by the impact of interest rate hikes on consumer demand.

New data released today shows that home values are declining at their quickest rate since June 2009.

According to data from lender Nationwide, the average price of a home dropped by a larger-than-anticipated 5.3% from its peak in August 2022 to £259,153 last month. The rate of drop from July of last year was 3.8%.

Rising mortgage rates have made purchasing a home prohibitively expensive for many people this summer, especially those who need large loans.
According to Nationwide, mortgage approvals in recent months are roughly 20% lower than they were before the recession.

Robert Gardner, the chief economist at the building society, has said, “A relatively soft landing is still achievable, providing broader economic conditions evolve in line with our and most other forecasters’ expectations.”

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To that, he said, “An examination of the composition of transactions reveals that cash purchases, though down from the 2021 highs, have been remarkably resilient, while purchases involving a mortgage have slowed much more sharply.”

“This latest data from the Nationwide paints a bleak picture of the UK property market,” said Kundan Bhaduri, director of Hatton Garden-based property developer and portfolio landlord The Kushman Group.Experts have warned that if mortgage rates continue high, the London real estate market might crash, causing house values to fall by as much as 20%.

Property values in the nation’s capital have shown surprising resilience in the face of 14 interest rate hikes from the Bank of England. Nearly a million fixed-rate mortgages, including about 100,000 in London, will need to be refinanced by the end of the year, which is a huge cause for concern.
Today, mortgage experts also warned of a “mass exodus” of London landlords, which they said would have a negative impact on property values. It followed reports that London landlords who renew their buy-to-let mortgages this winter could be £6,384 worse off annually.

Based on a sample of 1,000 fixed-rate mortgages that will expire between next month and April 2024, Dashly, a mortgage insight platform, found that even if landlords switched to the best available rate, their monthly payments could almost double, from £662 to £1,194. That will probably force a lot of people to make the tough decision of selling.