Decline in House Prices: Nationwide Data Reveals a 0.1% Drop in August
In a move aimed at boosting the housing market, HSBC UK announced yesterday that it will increase the loan-to-income (LTI) multiple to up to 5.5 times salary for first-time buyers. This marks a significant change from the previous cap of 4.49 times salary.
Despite this development, the annual rate of house price growth slowed to 2.1% in August, according to data released by Nationwide. Analysts had forecast a 0.2% monthly rise and a 2.8% annual increase, but these predictions did not materialise.
The average price of a home in England stood at £271,079 in August, a 0.1% decrease compared with July. This decrease, however small, could indicate a gradual improvement in affordability if income growth continues to outpace house price growth.
Raising a deposit for a home remains challenging due to high house prices and the cost of living pressures in recent years. The cost of servicing a mortgage is also a barrier for many, with mortgage costs more than three times the levels prevailing in the wake of the pandemic.
Robert Gardner, chief economist at Nationwide, stated that house prices are still high compared with household incomes. He emphasised that affordability remains a concern for many potential homebuyers.
Calls have been made to scrap office-to-homes conversions in England, with concerns that these conversions are driving up house prices and making it even more difficult for first-time buyers to enter the market.
The Bank of England cut interest rates by 0.25% last month, a move aimed at stimulating economic growth and supporting borrowers. If interest rates are lowered again in the coming quarters, borrowing costs are likely to moderate a little further, which should support buyer demand.
In other news, the High Court ruled that asylum seekers can stay at The Bell Hotel, a decision that has sparked debate about the rights of asylum seekers and the government's responsibility to provide adequate accommodation.
In conclusion, while HSBC's decision to increase the LTI multiple for first-time buyers could provide a boost to the housing market, affordability remains a significant concern for many potential homebuyers. The slowdown in house price growth in August is a positive sign, but more needs to be done to address the underlying issues of affordability and access to mortgage finance.
