U.K. house prices fall the most in 29 months as budget chaos hits mortgage lending

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U.K. house prices fell by the most in over two years in November, as the chaos unleashed by Liz Truss’s ill-fated ‘mini-budget’ gummed up the country’s mortgage lending market.

Average selling prices fell 1.4% from October, the most since June 2020, when nationwide lockdowns in the first stage of the pandemic had complicated the selling process, according to Nationwide, one of the country’s biggest mortgage lenders. That brought the annual rate of house price inflation down to 4.4%, the slowest it’s been since September 2020.

Both figures were well below consensus forecasts. 

Lenders had withdrawn nearly all their fixed-rate mortgage products in October after then-Prime Minister Truss attempted to revive a flagging U.K. economy with the biggest tax cuts in over 50 years. Her plans to fund the cuts with higher borrowing were shot down by the bond markets, however, which pushed U.K. bond yields sharply higher in anticipation that the measures would stoke even higher inflation.

““While financial market conditions have stabilised, interest rates for new mortgages remain elevated and the market has lost a significant degree of momentum,” Nationwide’s chief economist Robert Gardner said in a statement. “Housing affordability for potential buyers and home movers has become much more stretched at a time when household finances are already under pressure from high inflation.”

He added that the market is likely to stay subdued for some time yet, with inflation set to remain high for most of next year, causing the Bank of England to raise interest rates further. 

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