Soaring mortgage rates hit the London property market in the first quarter of the year when average house prices dropped by 1.4 per cent, new figures show today.
Leading lender Nationwide said the capital saw one of the biggest drops of any UK region during the January to March period as higher borrowing costs started to bite.
The fall marks a sharp turnaround from the 4.1 per cent growth seen in the previous quarter and leaves the average cost of a home in London at £511,293.
Interest rates have been hiked 11 times since the first increase from a record low of 0.1 per cent in December 2021, piling extra pressure on homeowners.
Last week the Bank of England delivered a 0.25 per cent rise to 4.25 per cent that many economists believe will prove a high water mark with rates starting to fall again towards the end of the year.
Robert Gardner, Nationwide’s chief economist, said: “The housing market reached a turning point last year as a result of the financial market turbulence which followed the mini-Budget.
“Since then, activity has remained subdued — the number of mortgages approved for house purchase remained weak at 43,500 cases in February, almost 40 per cent below the level prevailing a year ago.
“It will be hard for the market to regain much momentum in the near term since consumer confidence remains weak and household budgets remain under pressure from high inflation.”
The Nationwide data came as households braced for a further volley of price hikes that could leave them hundreds of pounds a year worse off.
From tomorrow, millions of people will face increases to their broadband, mobile, water and council tax bills.
Most local authorities are putting up council tax by five per cent from April, meaning people living in a band D home can expect to pay about an extra £100 each year.
The average water bill will go up by £31 a year, a rise of 7.5 per cent, while broadband and mobile phone prices are due to rise between 14 and 17 per cent.
Meanwhile, the Government’s Energy Bill Support Scheme comes to an end from April, leaving households having to find an extra £66 a month to cover their gas and electricity.
Even prescription charges in England will rise by 30p from April 1.
The increase in unavoidable bills comes as consumers are already grappling with soaring inflation and food prices.
Iain McKenzie, CEO of industry body The Guild of Property Professionals, said: “The high cost of living remains the greatest barrier to home ownership in this country.
“Inflation levels continue to squeeze households and prospective buyers will need to tighten their purse strings even tighter… as government support on energy bills is withdrawn.”
Speaking about the price hikes coming in from tomorrow, Matthew Upton, director of policy at Citizens Advice, said: “We called on [mobile and broadband] firms to support their customers but they didn’t listen.
“Instead, they’re pushing ahead with these mid-contract price rises. When [Ofcom] does act, it must deal with this once and for all by banning any future mid-contract price hikes.”
