Fog blanketed Canary Wharf’s business district including global financial institutions Citigroup Inc., State Street Corp., Barclays Plc, HSBC Holdings Plc and commercial office block No. 1 Canada Square, Isle of Dogs on November 05, 2020 in London, England.
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LONDON – UK house prices are set to fall by up to 10% this year, as higher mortgage rates and a wider cost of living crisis dampen home buying, Lloyds Bank CEO Charlie Nunn told CNBC on Tuesday.
The UK housing market is under pressure following former prime minister Liz Truss’s “mini budget” in September, which saw lenders withdraw around 40% of all mortgage products from the UK market amid concerns about rising interest rates.
The UK property sector has remained sluggish in recent months, as the Bank of England continues to raise interest rates aggressively in a bid to rein in double-digit inflation. It is projected that the country is in the longest recession on record.
Inflation reached 10.7% in November, and the Bank has raised rates at nine consecutive policy meetings to lift the key rate from 0.1% to 3.5%. More increases are expected in the coming months.
A report from the British property site Rightmove showed that asking prices for houses rose slightly in January for the first time in two months.
“The base case for 2023 is that we will have a recession – a mild recession – GDP of around -0.1% this year, unemployment remains strong and more due to supply-side constraints, interest rates around 4% and the recovery is coming. into 2023,” Nunn said. on the sidelines of the World Economic Forum in Davos, Switzerland.
“Another challenge our customers are focusing on is house prices and we’re seeing house prices fall by around 8-10% this year.”
The independent Office for Budget Responsibility (OBR) predicts that British households will experience the sharpest decline in living standards. As head of the UK’s largest retail and commercial financial services group, Nunn announced that Lloyds was seeing a “tale of two stories.”
“First of all, there is a relatively small but very important group of customers with a mortgage and also without who will struggle to meet the cost of living. About 1% of customers can be seen in the UK and we really need to focus on supporting them,” he said.
“We see some of our larger customers having to change their spending and adapt to the higher cost of living and higher mortgage costs, but there is still real resilience in businesses, in households and in individuals at higher income levels in the UK and strong throw we see.”