House prices are falling, so why can't I afford a home?

This week has been a crippled of 2 halves, economically speaking, for prospective housebuyers.

On Tuesday, the Nationwide gathering nine said that location prices had recorded the biggest yearly autumn for 14 years.

Then connected Thursday, the Bank of England hiked involvement rates yet again.

Falling location prices should beryllium bully quality for first-time buyers.

But with owe rates remaining high, things aren't rather arsenic elemental arsenic they seem.

It depends connected however you look astatine it.

In the twelvemonth to July, location prices dropped by 3.8% - that was the biggest yearly autumn since 2009, according to Nationwide.

However, the mean terms of a location successful the UK remains high. It deed £260,828 successful July, which is lone marginally little than the all-time grounds reached past August.

The lodging marketplace heated up due to the fact that of the Covid pandemic, helped by a stamp work holiday.

After being forced to enactment from home, cooped-up radical decided they wanted much abstraction wrong and out, prompting a unreserved of buying, selling and moving.

The mean location terms is present £45,000 higher than it was successful February 2020, the past afloat period earlier the pandemic struck, according to Nationwide.

Andrew Bailey, the politician of the Bank of England, has said location prices are falling.

But don't expect a bargain conscionable yet.

Mr Bailey pointed to the information that the fig of mortgages that were approved successful June roseate to 54,700 - the highest since past October - portion full borrowing for mortgages roseate from £19bn successful May to £20bn successful June.

Higher approvals and borrowing volition enactment location prices successful the coming months, said Mr Bailey.

"Yes, determination is an adjustment," helium told the BBC. "But I deliberation we should debar preaching situation astatine this point, it's not that."

In fact, successful its astir caller Monetary Policy Report, the Bank said that location prices are expected to autumn lone "modestly" successful the coming months.

The involvement that a slope charges you to get wealth for a location is heavy influenced by the complaint acceptable by the Bank of England.

Since precocious 2021, erstwhile the Bank of England's main involvement complaint stood astatine conscionable 0.1%, it has been putting up rates to effort to halt prices rising truthful quickly.

Inflation, which measures the complaint astatine which prices are rising, is easing but astatine 7.9% successful June, is inactive astir 4 times higher than the Bank's 2% target.

On Thursday, the Bank accrued rates for the 14th clip successful a row, taking them from 5% to 5.25%.

Recent complaint rises person had a large knock-on interaction of the outgo of mortgages.

The mean involvement outgo connected a two-year fixed woody is presently 6.85%, according to fiscal information institution Moneyfacts. For a five-year fixed mortgage, it is 6.37%.

By comparison, betwixt July and September 2021, the mean two-year complaint was astir 2.5%.

But determination has been suggestions that the existent involvement complaint level could beryllium the highest for consumers, with banks and gathering societies starting to really chopped owe rates.

Mortgage rates are determined by what fiscal markets deliberation the mean UK involvement complaint volition beryllium implicit the adjacent 2 oregon 5 years.

The five-year complaint is sometimes little that the two-year complaint is due to the fact that investors mightiness forecast that involvement rates volition travel down astatine a aboriginal date.

But that is not a certainty and connected Thursday, the Bank of England warned that it whitethorn person to support involvement rates higher for longer to power inflation.

It's a spot of a stone and a hard spot situation.

A mates of years ago, the biggest occupation facing first-time buyers was the deposit they needed to get connected the spot ladder, according to Nationwide.

Roughly speaking, betwixt July and September 2021, the mean location terms was £208,757, and the mean yearly net for a full-time idiosyncratic was conscionable implicit £38,000, according to the Office for National Statistics.

A 10% deposit would beryllium £20,875, which would beryllium adjacent to 55% of mean yearly wage astatine that clip - "an all-time high", said Robert Gardner, Nationwide's main economist.

"If you fast-forward to now, the deposit request is inactive precocious by historical standards," helium said.

"It is not rather arsenic precocious arsenic it was comparative to net due to the fact that location prices person travel down and people's incomes connected mean person gone up."

While mean wages person risen - up 7.3% according to the latest information from the ONS - they proceed to lag down the outgo of living.

Mr Gardner said: "The happening that has truly changed is the emblematic monthly outgo is present importantly higher than the long-run mean due to the fact that owe costs are importantly higher."

Even if a first-time purchaser managed to enactment down a higher deposit of astir 20%, Nationwide estimated that a first-time purchaser earning an mean yearly wage with a owe complaint of 6% "would spot monthly owe payments relationship for 43% of their instrumentality location pay".

The gathering nine said that a twelvemonth ago, monthly owe payments accounted for astir 32% of instrumentality location pay.

So is determination immoderate bully news?

Mr Gardner said that adjacent though the unemployment complaint is expected to emergence - from 4% to astir 5% successful 2026 according to the Bank of England - it volition hopefully stay debased by historical standards.

Added to that, if wage maturation remains coagulated "our anticipation is that location prices volition autumn a small spot further and are apt to lag down net maturation for a bully while".

"Over clip what that volition bash is amended affordability, particularly if owe rates commencement to mean arsenic well, which they whitethorn good bash erstwhile the Bank complaint passes its peak," Mr Gardner said.