LONDON: British house prices edged down in May and the country’s housing market faces headwinds in the months ahead after a recent jump in borrowing costs, mortgage lender Nationwide said on Thursday.
Nationwide’s measure of house prices fell by 0.1% in May from April after a monthly 0.4% rise in April.
Analysts polled by Reuters had expected prices to rise by 0.1% in month-on-month terms. Compared with May last year, the average house price was down 3.4% after a 2.7% annual fall in April, Nationwide said.
The housing market showed signs of recovery in early 2023 after a jump in mortgage rates at the end of last year triggered by former Prime Minister Liz Truss’s “mini-budget” plans for tax cuts which sent financial markets into turmoil.
However, stronger-than-expected inflation figures published last week caused a fresh rise in bond yields which in turn prompted some lenders to rein in or reprice mortgage offers.
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“Headwinds to the housing market look set to strengthen in the near term,” Robert Gardner, Nationwide’s chief economist, said, citing the risk that the jump in borrowing costs and mortgage rates could be sustained.
“Nevertheless, in our view a relatively soft landing remains the most likely outcome since labour market conditions remain solid and household balance sheets appear in relatively good shape,” Gardner said.
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