Property prices fall for fifth month running as rates rise

HOUSE prices fell for a fifth month in a row in January as the property market slump continues.

The average price of a home dropped to £258,297 in January, down from £262,068 at the end of last year.

On an annual basis, house price growth fell back to 1.1pc in January, down from 2.8pc in December, according to the lender Nationwide. It found that overall prices had now dropped 3.2pc from the peak in August.

The fall comes as policymakers are expected to raise the Bank Rate by half a percentage point to 4pc today, adding further pressure onto thousands of homeowners with tracker mortgages

Robert Gardner, of Nationwide, said that a 10,600 drop in house purchase approvals in December reflected the sharp decline in mortgage applications in the market chaos triggered by the mini-budget. He said: “It will be hard for the market to regain much momentum in the near term as economic headwinds are set to remain strong.”

Mr Gardner added that affordability remained stretched, with the highest house price to earnings ratio in London standing at 9.2. Scotland and the North recorded the lowest ratio at 3.4. However, interest rates on fixed mortgages have steadily fallen since their peak in

November. The average two-year and five-year fixed rates are now 5.46pc and 5.22pc, analyst Moneyfacts said.

More than 1.6m homeowners will be hammered by another surge in their mortgage bills after today’s interest rate rise. If the Bank Rate hits 4pc, in line with market predictions, some 715,000 borrowers on tracker rates will see their

payments go up by £588 a year, according to trade body UK Finance.

Another 895,000 homeowners on standard variable rates (SVRS) will be hit with increases of £370 a year.

Meanwhile, millions of households failed to pay their bills in January, as families struggled to manage their cash after Christmas, research from Which? has found.

Around 2.3m households defaulted on at least one mortgage, rent, loan, credit card or household bill payment in January, up from 1.9m in December, according to the consumer campaign group.