You are here: Home - Mortgages - Buy To Let - News -

House prices record biggest fall in 3 years

0
Written by:
29/06/2012
House prices showed the largest decline in three years as the UK economy dipped back into recession and household spending hit an all-time low.

According to the building society Nationwide, house prices declined by 0.6% in June, taking the annual pace of house price growth down to -1.5%, the lowest reading since August 2009.

Robert Gardner, chief economist at Nationwide said: “The slightly weaker trend we’ve observed since March is unsurprising, given the difficult economic backdrop, with the UK economy dipping back into recession at the start of the year and few signs of a nearterm rebound.

“Part of the weakness in house prices may also relate to the ending of the stamp duty holiday in March, which provided a temporary boost in early 2012, as buyers brought forward purchases that would otherwise have taken place later in the year.”

The outlook for the house prices remains uncertain for the upcoming 12 months, as economic conditions are not expected to improve any time soon.

Garner continued: “However, policymakers’ efforts to bolster the supply of credit to the economy and to help lower the cost should provide support to demand.

“Moreover, the supply side of the market is still constrained, with construction failing to keep pace with the number of new households being formed. Overall, this suggests a continuation of the pattern experienced over the past two years, with prices remaining fairly stable over the next twelve months.”

Nationwide also attributes the expiry of the Stamp Duty holiday for first time buyers towards the end of March in helping to create significant volatility in the lending market in recent months.

Mortgage lending to first time buyers in March totalled £3bn, around 40% above usual levels. Moreover, 63% of first time buyer purchases in March were between £125,000 and £250,000, compared with around 50% normally.

Garner said: “It’s not hard to understand why the effect on the timing of
transactions was so strong – bringing forward purchases offered substantial savings. We estimate that over 200,000 first time buyers benefited from the stamp duty holiday over the last two years, saving a total of nearly £375m – around £1,800 each.

“It is harder to assess the extent to which the stamp duty holiday generated “additional” first time buyer activity, i.e. purchases that would not otherwise have taken place. Similarly, it is hard to judge how much activity will be dampened by its re-imposition.”

This follows recent a recent report from the British Banker’s Association (BBA) that mortgage repayments outstripped lending for the first time in 16 years. This change in behaviour is said to have arisen as households are focusing on paying down their debts.

Net mortgage lending declined by £73m – also partly due to borrowers finding it harder to get mortgages in recent months, with lenders tightening their borrowing criteria and raising their rates in response to the weak economy and the on-going Eurozone crisis.

Tag Box

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

The savings accounts paying the most interest

If one of your jobs this month is to get your finances in order, moving your savings to a higher paying deal i...

Coronavirus and your finances: what help can you get?

News and updates on everything to do with coronavirus and your personal finances.

Everything you need to know about being furloughed

If you’ve been ‘furloughed’ by your company, here’s what it means…

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Money Tips of the Week

Read previous post:
Holidaymakers are set to waste £160m in card charges

Brits heading abroad this summer are set to waste a staggering £160m in debit or credit charges, according to prepaid...

Close