UK house prices fall for the first time in more than a decade

London: House prices in the United Kingdom have fallen for the first time in 11 years, as rising borrowing costs affect buyers, according to data released by the mortgage lender Halifax.

In May, average property prices fell 1 percent compared with the same month last year and were 7,500 pounds ($9,330) lower than their peak in August, Halifax said on Wednesday.

Kim Kinnaird, director of mortgages at Halifax, said higher interest rates were likely to increase pressure on house prices.

“The brief upturn we saw in the housing market in the first quarter of this year has faded, with the impact of higher interest rates gradually feeding through to household budgets, and in particular those with fixed rate mortgage deals coming to an end,” Kinnaird said in a statement.

“With consumer price inflation remaining stubbornly high, markets are pricing in several more rate rises that would take [the] base rate above 5 percent for the first time since the start of 2008. Those expectations have led fixed mortgage rates to start rising again across the market.”

House prices had risen after former British Prime Minister Liz Truss introduced big tax cuts last September, in an effort to improve the UK’s economy. But her announcement shook the country and triggered financial turmoil.

Last week, Nationwide, another mortgage lender, reported a steeper 0.5 percent month-on-month drop in house prices in April and a 3.4 percent annual decline – the biggest drop since 2009.

Prime Minister Rishi Sunak and his finance minister Jeremy Hunt say they would like to cut taxes when possible – something many members of their Conservative Party want before a national election expected in 2024 – but their main priority is to halve inflation this year.

The Organisation for Economic Co-operation and Development (OECD) says it expects British inflation to slow to 2.8 percent in 2024, lower than in France and Germany.

The UK central bank will next convene on June 22, with traders betting on an 88 percent chance of a 25-basis-point rate rise. The Bank of England has raised rates 12 times since late 2021 to 4.5 percent from just 0.1 percent in to try to calm inflation.