UK housing market cools as inflation rises and consumer confidence falls

Property sellers are being forced to reduce their asking prices

Window shopping at an estate agency in South Kensington, London. Analysts say prices are on a downturn but do not agree on what that may mean for the long-term health of the housing market. PA
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The UK housing market is showing signs of cooling as a growing number of sellers cut asking prices and the average time it takes to sell a home increases, new data suggests.

The Bank of England is widely tipped to increase interest rates further, which will cool the market if this feeds into mortgage rates.

In May, house prices were 11.2 per cent higher than a year earlier, according to Nationwide’s index, down from 12.1 per cent in April.

Data released by the Bank this week suggested families are starting to feel the pinch, as mortgage borrowing slumped in May and consumers once again resorted to credit cards to help to pay bills.

Lenders are following the Bank by raising interest rates, contributing to the rapid increase in expenses that people must bear.

In April, asking prices on nearly two dozen homes up for sale were cut by an average of 9 per cent, the highest level of discounting in 18 months, according to property portal Zoopla.

The UK's housing market is cooling. PA

“We’re seeing the start of signals that things are softening,” said Grainne Gilmore, Zoopla’s head of research.

The housing market is set to slow down as the year progresses, Nationwide said, saying rising inflation was responsible.

“Demand is being supported by strong labour market conditions, where the unemployment rate has fallen towards 50-year lows, and with the number of job vacancies at a record high,” said Robert Gardner, Nationwide’s chief economist.

“At the same time, the stock of homes on the market has remained low, keeping upward pressure on house prices.

“We continue to expect the housing market to slow as the year progresses.

“Household finances are likely to remain under pressure, with inflation set to reach double digits in the coming quarters if global energy prices remain high.”

Consumer confidence has plummeted towards record lows, Mr Gardner said.

Alice Haine, personal finance analyst at investment platform Bestinvest, said there is mounting evidence that annual house price growth is on the downturn.

However, she said figures from Nationwide’s index show that “despite a pandemic, four consecutive interest rate rises at the Bank of England’s monetary policy meetings, and the deepening cost-of-living crisis, house price activity remains robust”.

Updated: June 01, 2022, 8:52 AM