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Building society Nationwide on Friday warned that house prices in the UK might begin to slide later this year as budgets are put under pressure by the rising cost of living.
The mortgage lender said that while house prices have been increasing at double-digit rates so far this year, they could start falling again.
‘Higher property prices and interest rates, together with steep increases in the cost of living, mean housing has become less affordable and we expect housing market activity to slow and the rate of house price growth to moderate in the coming quarters,’ Nationwide said in its annual results on Friday.
‘There is a risk of a downward movement in house prices, given the pressure on household budgets.’
Inflation reached a 40-year high in the year to April, hitting 9% as measured by the consumer price index.
Although unemployment remains low, this is still squeezing household budgets very hard, especially among those on lower incomes who were unable to save, or saved less, during the pandemic.
‘We will continue to plan for geopolitical risks and economic pressures arising directly and indirectly from the war in Ukraine, notably the rising energy bills and inflation, which are intensifying pressure on household budgets, which are already under strain,’ said chairman Kevin Parry.
‘Given our financial strength, we are well-positioned to manage these impacts, as well as to evolve our services to meet our members' changing needs.’
Nationwide said that it had nearly doubled its pretax profit to £1.60 billion in the financial year that ended April 4 from £790 million the year before, on underlying income of £3.87 billion, up 18% from £3.29 billion.
Mortgage lending grew by £6.9 billion due to the low interest rates and strong housing market.
The business also announced that Debbie Crosbie, who was revealed as the new chief executive in December, will start the role on June 2.
Victoria Scholar, head of investment at Interactive Investor, said: ‘Although these results represent strong growth year-on-year, Crosbie has a difficult task on her hands as Nationwide prepares for a series of headwinds from the cost-of-living crisis, spiralling inflation, a peaking housing market and the deteriorating economic outlook.’
By August Graham, PA City Reporter
source: PA
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