(Alliance News) - UK house prices continue to fall, as rising mortgage rates deter home buyers, new figures on Thursday showed.
"House prices flattened off in May after a rise in April. But with mortgage rates now on their way back up we suspect that the stabilisation in prices over the last couple of months will soon give way to renewed falls," said Capital Economics Senior Property Economist Andrew Wishart.
The annual decline in UK house prices sped up in May, according to new data from mortgage lender Nationwide on Thursday.
On a seasonally adjusted basis, May saw a 0.1% month-on-month fall in house prices. In April, on the same basis, house prices had inched up by 0.4%.
On a non-seasonally-adjusted basis, the average house price stood at GBP260,736 last month, up slightly from GBP260,441 in April.
On an annual basis, house prices declined by 3.4% in May, accelerating from a fall of 2.7% in April.
Overall the Nationwide House Price Index remained 4% below its peak last August, Capital Economics Wishart said.
"UK house builders have largely shrugged off a snapshot indicating the slowly building confidence in the housing market was being chipped away. House prices fell back in May, but there are expectations of sharper falls to come with successive interest rate hikes forecast to tame wild inflation. These expectations have meant the most competitive mortgage deals are being stripped out of the market. The worry is that this will spark a crash in confidence and a sharp slide in prices," Susannah Streeter, head of money and markets, Hargreaves Lansdown.
London-listed housebuilders were marginally higher following the data. Taylor Wimpey was up 0.8%, Berkeley Group up 1.3% and Barratt Developments up 0.9%.
"The renewed decline in Nationwide's measure of house prices in May suggests buyers still are struggling with affordability," said Pantheon Macro Senior UK Economist Gabriella Dickens.
Also on Thursday, the Bank of England said net mortgage approvals in the UK fell in April, while approvals for remortgaging increased slightly.
Borrowing of mortgage debt by individuals continued to decline from net zero in March to GBP1.4 billion of net repayments in April.
"This is the lowest level on record, if the period since the onset of the Covid-19 pandemic is excluded," the BoE said.
Net mortgage approvals for house purchases fell to 48,700 in April from 51,500 in March, while approvals for remortgaging increased slightly to 32,500 from 32,200 during the same period.
The effective interest rate on newly draw mortgages, meaning the actual interest rate paid, increased by five basis points to 4.46%.
The BoE's own benchmark interest rate is currently 4.5%, following a 25 basis point hike in early May
The BoE noted that net borrowing on consumer credit by individuals in April was broadly unchanged when compared to March, at GBP1.6 billion.
By Sophie Rose, Alliance News reporter
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