Nationwide: First year-on-year house price decline since 2020

UK annual house prices have declined for the first time since June 2020, and were down 1.1% in February year-on-year, the Nationwide has said today. 

The building society figures also showed prices went down 0.5% in February from the month before - the sixth monthly drop in a row - meaning they were 3.7% lower than the August 2022 peak. 

The year-on-year fall of 1.1% was also the biggest seen by the mortgage lender since November 2012, and came as the Bank of England reported the lowest level of mortgage approvals for 13 years.

A UK home cost an average £258,297 in January compared to £257,406 in February, the Nationwide said. Robert Gardner, Nationwide’s chief economist, said the house prices reflected the ongoing market turbulence caused by the mini-budget in September last year. 

“While financial market conditions normalised some time ago, housing market activity has remained subdued,” he said. 

The drop in house prices was likely to have reflected the “lingering impact on confidence as well as the cumulative impact of the financial pressures that have been weighing on households for some time”. 

Although consumer confidence had improved in recent months it was still “languishing at levels prevailing during the depths of the financial crisis”, Gardner added. 

He predicted it would be difficult for the housing market to regain momentum in the short term because of the struggling economy, with mortgage rates still high and the labour market expected to weaken in the quarters ahead. Mortgage rates have come down but hit a 14-year high last year after the mini-budget.  

Gardner did note, however, the housing market should start to improve as inflation moderates in the coming months. The Bank of England gave confidence last month when it said the recession would be shallower than previously thought.  

Frances McDonald, research analyst at Savills, said: “While the bank base rate has continued to rise, we’re starting to see greater stability in the mortgage markets with fixed rate mortgage rates coming down from a peak in October and more mortgage products now available to borrowers, particularly at lower loan-to-value ratios. This is likely a reflection of lenders trying to gain a greater share of a smaller mortgage market, but there is also an increasing expectation that inflation has peaked and that Bank base rate is likely to start coming down in 2024.”

The Nationwide’s figures reflect those of other indices recently. Rightmove showed house prices remained flat in February.  Office for National Statistics last month indicated the annual growth in house prices slowed in December. Zoopla yesterday showed UK house sellers have had to discount prices by an average of 4.5% to shift homes last month.

The figures from Nationwide came as the Bank of England’s latest data revealed that net mortgage approvals for house purchases, seen as an indicator of future borrowing, decreased to 39,600 in January, from 40,500 in December, the fifth consecutive monthly drop. The Bank said that, the covid period excluded, the data meant house purchase approvals were at the lowest level since the 32,400 recorded in January 2009, 13 years ago.”