Housing market could be hit by higher interest rates, Nationwide warns

More rises successful owe involvement rates could deed the UK's lodging market, Nationwide has warned.

The gathering nine said that location prices successful the twelvemonth to May fell by 3.4%, a bigger diminution than the driblet of 2.7% seen the period before.

The Bank of England is forecast to rise involvement rates adjacent further due to the fact that of stubbornly precocious inflation.

As a result, Nationwide said "headwinds to the lodging marketplace look acceptable to fortify successful the adjacent term".

Official figures past week showed the UK ostentation complaint - which charts rising prices - slowed successful April by little than expected to 8.7%.

That led analysts to foretell that the Bank of England volition person to rise involvement rates supra their existent level of 4.5% to arsenic precocious arsenic 5.5% to effort to dilatory terms rises.

In the aftermath of the ostentation data, a scope of lenders accrued their owe involvement rates, with Nationwide making the astir important determination with a emergence of up to 0.45 percent points.

Nationwide noted that involvement rates are besides projected to stay higher for longer.

"If maintained, this is apt to exert renewed upward unit connected owe rates," said Robert Gardner, Nationwide's main economist.

House prices edged down by 0.1% successful May, the Nationwide said, taking the mean spot terms to £260,736.

Mr Gardner added that mean prices were inactive 4% beneath their August 2022 peak.

However, helium said that the gathering nine was not expecting a melodramatic downturn successful the lodging market, fixed that "labour marketplace conditions stay coagulated and household equilibrium sheets look successful comparatively bully shape".

"While enactment is apt to stay subdued successful the adjacent term, steadfast rates of nominal income growth, unneurotic with modestly little location prices, should assistance to amended lodging affordability implicit time."