UK house prices at risk, warns Nationwide
HOUSE prices are at risk as spending power is set to take a big hit, the boss of Nationwide Building Society has warned.
Joe Garner said higher prices and interest rates, together with steep rises in the cost of living, mean buying a home will be tougher.
HE said: ‘Higher inflation, which has been exacerbated by the war in Ukraine, is likely to exert a significant drag on the economy in the near term.
‘It will place significant pressure on household budgets, especially for those on lower incomes who also accumulated fewer savings during Covid-related lockdowns.’
He added that that could also result in a fall in house prices. His remarks came as the UK’s biggest mutual reported a near-doubling of annual profits on the back of buoyant mortgage demand.
Despite unemployment hitting a record low this week, surging costs are piling pressure on people’s pockets, leaving buyers with less cash to save for a deposit.
Victoria Scholar, head of investment at Interactive Investor, said the uncertain outlook meant new Nationwide boss Debbie Crosbie, who is taking over from Garner in June, had a ‘difficult task on her hands’ as it braced for ‘a series of headwinds: the cost-of-living crisis, spiraling inflation, a peaking housing market and the deteriorating economic outlook.’
The bleak outlook overshadowed Nationwide’s record results – a profit of £1.6bn for the year to April 4, more than double the £790m of the previous year.
The surge was attributed to a strong rise in income from interest on mortgages taken out early in the pandemic. Mortgage lending increased to £36.5bn from £29.6bn in the year, allowing it to capture a bigger market share.
Activity in the housing market is higher than pre-pandemic levels, with prices having increased at double-digit rates so far in 2022.