Asking prices for homes in the UK have experienced a decline in June, signaling an early summer slowdown driven by the turbulence in the mortgage market and expectations of further
interest rate hikes by the Bank of England, according to a survey by property website Rightmove. While the drop was minimal, with an average decrease of £82 ($105) or close to zero in percentage terms, it marked the first monthly decline in asking prices this year and the first drop in June since 2017.
The survey revealed that average asking prices during this period in the past decade have typically increased by 0.6%. However, compared to the previous year, asking prices were still 1.1% higher.
Rightmove's Director of Property Science, Tim Bannister, commented on the potential impact of the upcoming inflation figures and the Bank of England's interest rate decision, both set to be published later this week. Bannister noted the various factors influencing the housing market, such as persistent high inflation, significant wage increases, and their effects on mortgage interest rates and availability. He suggested that these developments could introduce further twists and turns in the market.
Recent days and weeks have seen British mortgage lenders adjust or withdraw their home loan offerings due to the rising consumer price inflation and wage growth, which have led to expectations of a continued interest rate hike cycle by the Bank of England. Major lenders like Nationwide, Halifax, and HSBC have announced changes in their mortgage rates as a response.
Market expectations indicate that the Bank of England will raise interest rates for the 13th consecutive meeting, reaching 4.75% on Thursday, with a forecasted peak of 5.75% by December, compared to the current rate of 4.5%.
Analysis from the Resolution Foundation think tank, published on Saturday, projected a rise of £2,900 in average annual mortgage repayments for households planning to remortgage next year, an increase from the £2,000 forecast in May.
Typically, UK homebuyers opt for fixed-rate mortgages for a period of two or five years before remortgaging to a new fixed rate or accepting a floating rate.
Although the housing market in Britain showed signs of recovery earlier in 2023 after the upheaval caused by former Prime Minister Liz Truss's economic policies, analysts are now closely observing the potential impact of interest rate hikes on the sector. Bannister suggested that the rise in interest rates and subsequent increase in monthly mortgage payments could lead prospective buyers to pause, although buyer demand in June has not yet been significantly affected, although there has been a slight impact on sales activity.