House price drop ‘unavoidable’ as market continues to cool

HOUSE price falls are likely to be “unavoidable”, experts have warned, after property market growth slowed for the third month in a row.

Prices rose by 10.7pc in the year to June, down from a rate of 11.2pc in May, according to Nationwide Building Society. Property prices climbed by just 0.3pc month-on-month, a third of the 0.9pc average recorded over the previous 12 months, as rising interest rates crippled home buyers.

Gabriella Dickens, of Pantheon Macroeconomics, a research group, said: “Looking ahead, a fall in house prices is pretty much unavoidable given the recent jump in mortgage rates.”

The rate for a two-year fixed-rate 25pc deposit mortgage rose from 1.53pc in November to 2.63pc in May, the fastest increase over a six-month period since 2003. It means a typical buyer has to pay an extra £1,980 in mortgage bills compared with at the end of last year.

Pantheon said it expected the average mortgage rate to rise to 3.2pc in July, which will cost the average borrower an extra £150 per month. House prices will fall by 2pc in the next six months, it said.

Imogen Sporle, of Finanze, a mortgage broker, said: “I am fully subscribed to the idea of house prices crashing soon. Whether the full crash happens in 2022 or shortly after, I am not sure, but it’s coming.”

Robert Gardner, of Nationwide, said: “There are tentative signs of a slowdown, with the number of mortgages approved for house purchases falling back towards pre-pandemic levels.”

Although the growth rate slowed in June, the average house price still hit a new record high of £271,613 – £26,000 more than a year ago.

Zoopla, the property website, warned of “emerging signs” of a market slowdown as agreed sales fell by 13pc year on year. Buyer demand, which Zoopla measures as a combination of searches and inquiries, is rapidly cooling. Back in January, it peaked at 86pc above the five-year average. By the end of June, this gain had fallen to 37pc above the historic benchmark.