Housing market activity in the UK is likely to remain “subdued in the near term”, according to the latest monthly report from Nationwide.
The building society found that average house prices in the year to May fell by 3.4%, the biggest decrease since July 2009.
Prices also edged down by 0.1% from the previous month, taking the average property price to £260,736.
Average house prices remain 4% below their August 2022 peak.
Nationwide warned that further rises in mortgage interest rates could hit the housing market this year.
“While consumer price inflation did slow in April, it was a much smaller decline than most analysts had expected,” said Robert Gardner, Nationwide’s chief economist. “As a result, investors’ expectations for the future path of Bank Rate increased noticeably in late May, suggesting it could peak at c5.5%, well above the c4.5% peak that was priced in around late March.”
Interest rates are also now projected to remain higher for longer.
“If maintained, this is likely to exert renewed upward pressure on mortgage rates,” Gardner said.
