British house prices recorded their first monthly fall since July 2021 last month, mortgage lender Nationwide said on Tuesday, after the market was hit by turmoil during Prime Minister Liz Truss’s short-lived premiership.
Borrowing costs soared and many lenders temporarily stopped issuing loans after Truss’s 45 billion pound ($52 billion) unfunded package of tax cuts caused a fire sale of assets by pension funds that forced the Bank of England to stabilise the market.
Nationwide Building Society said house prices dropped by 0.9% in October after being unchanged in September, while they are 7.2% higher than a year earlier, slowing from September’s annual increase of 9.5%. Economists polled by Reuters had expected an annual increase of 8.3%
“The market has undoubtedly been impacted by the turmoil following the mini-Budget, which led to a sharp rise in market interest rates,” Nationwide chief economist Robert Gardner said.
Although Truss reversed many of her tax cut measures and sacked her finance minister, Kwasi Kwarteng, it proved too little to keep her in office and she was succeeded by Rishi Sunak as prime minister last week.
The monthly fall in house prices was the largest since June 2020, when the market was crimped by initial COVID-19 pandemic restrictions, while the annual rise was the weakest since April 2021.
House prices boomed in Britain and many other Western countries during the pandemic, as people sought more living space, but have since started to slow as rising consumer price inflation and higher official interest rates squeeze disposable income.