British House Prices Plunged Last Month

British House Prices Plunged Last Month

11 months ago2 mins

Data out on Friday showed that British house prices slipped more quickly than expected last month.

What does this mean?

The UK housing market is having a bit of a rough ride. Interest rate hikes haven’t let up, and last week’s data from the Bank of England (BoE) showed the average rate on new mortgages climbed to 4.2% – the highest since 2008. Throw in stretched household budgets and sagging consumer confidence, and it's no surprise that a wave of would-be buyers have been left feeling like the property ladder they want to climb is a lot closer to a slide. That weighed on house prices in March, which took a 3.1% dip from the same period last year. And that steep plunge – even worse than economists' predictions – marked the biggest yearly drop in house prices since 2009.

UK house prices

Why should I care?

For markets: More to come.

Economists reckon the lion's share of the dropoff is still to come. See, even after the recent tumble, the average UK house price is still 19% higher than pre-pandemic levels – showing just how much cheap Covid-era money inflated the property bubble. And there’s a few other potential curveballs too: the government's Help To Buy scheme – which eased deposit requirements for first-time buyers – has ended, which will probably end up hitting demand. Plus, millions of fixed-rate deals are set to expire this year, which the BoE says could put over 100,000 households at risk of defaulting.

Zooming out: Pack your hiking boots.

UK and EU households aren't out of the woods when it comes to inflation. Sure, data from last Friday showed eurozone inflation dropping to its lowest level in a year, thanks to a dip in energy prices. But core inflation, which excludes volatile food and energy prices, hit another record high – a sign that inflation’s still lingering. And with banking stress easing off, some economists think that’ll lead the European Central Bank to hike interest rates even more down the line.

Eurozone inflation
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