UK annual house prices down for first time in 11 years

LONDON

The UK's largest mortgage lender on Wednesday reported a 1% annual decline in house prices, marking the first drop since 2012.

According to a statement by Halifax, the average house prices in May were £3,000 ($3,740) lower than a year ago and £7,500 below their peak last August.

The lender, which is also increasing its mortgage rates, attributed the decrease in prices to reduced confidence caused by higher borrowing costs.

"But prices are still £5,000 up since the end of last year, and £25,000 above the level of two years ago," said Kim Kinnaird, the director of Halifax Mortgages.

"With consumer price inflation remaining stubbornly high, markets are pricing in several more rate rises that would take interest rates above 5% for the first time since the start of 2008. Those expectations have led fixed mortgage rates to start rising again across the market," she added.

As buyers and sellers recalibrate their expectations, confidence in the housing market will "inevitably" be affected, she said, adding: "Therefore further downward pressure on house prices is still expected."

The average price of a home in the UK is now £286,532 ($357,540).

Halifax also mentioned that house prices in the south of England have experienced a decline, while all other regions, except Wales, have observed slower annual price growth.

The consumer price inflation in the UK eased to 8.7% year-on-year in April, down from 10.1% in March but above the 8.2% figure expected.

This strengthened expectations that the Bank of England (BoE) would raise interest rates.

Market forecasts for interest rates reaching a peak of 5.5% by the end of this year had been revised following the April inflation data.