House prices have seen their largest annual decline since 2009, down by 5.3% compared to August last year, according to Nationwide. This drop equates to a £14,600 decrease in the value of a typical UK home since its peak in August 2022.
Higher borrowing costs have contributed to a housing market slowdown, with mortgage approvals also down by approximately 20% compared to pre-Covid levels. The Bank of England has raised interest rates 14 consecutive times since December 2021, with the current base rate at 5.25%. Consequently, lenders have increased mortgage rates, placing added strain on homebuyers.
Nationwide's chief economist, Robert Gardner, noted that the rise in borrowing costs makes the decline in average house prices unsurprising. As per Moneyfacts, the average two-year fixed mortgage rate stood at 6.7%, while the average five-year fixed rate was 6.19%.
UK average house prices reached a peak of £273,751 in August 2022 but have since fallen to £259,153.