The average price of a house in London has fallen by 0.6% between July and September, compared to the same time last year.
According to the latest Nationwide house price index, the cost of a home in the Capital fell to £471,761, making it the worst quarterly performance for the London housing market since the third quarter of 2009, when the UK economy was still reeling from the financial crisis.
London was also the worst performing region of the UK over the last quarter in terms of house price growth.
Robert Gardner, chief economist at Nationwide, said that London ‘has seen a particularly marked slowdown, with prices falling in annual terms for the first time in eight years’.
He said that housing market activity is subdued by historic standards, as pressure on household incomes affects spending power and weighs on consumer confidence.
Earlier this week Savills forecast that prices for luxury homes in the capital would continue to fall and could finish the year down by 4% on the end of 2016 as uncertainty over Brexit and recent tax changes affect the market.
Lucian Cook, the head of UK residential research at Savills, said; “Uncertainty fuelled by Brexit and a weakened government mandate since the June election means sentiment is fragile.”
Interest rate rises could be imminent.
The figures showing London house prices falling come as Mark Carney, the Governor of the Bank of England, said that interest rates could rise imminently.
Speaking to BBC Radio 4’s Today program, Mark Carney said the Bank was ready to raise the cost of borrowing should the economy continue to grow. He said; “All the indications are that in the relatively near term you can expect that interest rates will rise.”
Following the last meeting of the Bank’s Monetary Policy Committee, Paul Hollingsworth, UK economist at Capital Economics, predicted that the MPC would vote to raise interest rates in November of this year.
He said; “If the economy continues to hold up, and there are clearer signs that wage growth is building, then the first hike could come somewhat earlier than we had previously envisaged, possibly as soon as the next meeting in November alongside the Inflation Report.”
For existing mortgage customers, a rise in interest rates will lead to higher monthly repayments. For those currently on fixed rate deals, the effect won’t be felt immediately, but depending on when their two or five year term finishes, these borrowers will eventually face higher repayments.
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