UK's Nationwide forecasts 5% house price fall for 2023

A ‘For Sale” sign is seen outside a residential house during sunrise in London, Britain, September 28, 2022. REUTERS/Hannah McKay/File Photo

LONDON, Dec 20 (Reuters) - British house prices look on track to drop by about 5% next year, as home-buyers face higher interest rates, a squeeze on disposable income and a potential rise in unemployment, mortgage lender Nationwide Building Society said on Tuesday.

"The risks are skewed to the downside, but there is still a good chance that we can achieve a relatively soft landing next year with activity stabilising modestly below pre-pandemic levels and house prices edging lower, perhaps by around 5%," Nationwide's chief economist, Robert Gardner, said.

Last week rival mortgage lender Halifax forecast a fall of around 8% for 2023 and the government's Office for Budget Responsibility in November predicted that prices would slide by 9% by late 2024.

British house prices rose by more than a quarter in the two years after the onset of the COVID-19 pandemic as people sought more space to live and took advantage of low borrowing costs and tax incentives.

However, prices have now started to fall, with Nationwide reporting three consecutive monthly drops in average house prices for the first time since 2008.

Financial market turmoil in late September and early October added to the slowdown, as many lenders temporarily withdrew mortgage offers until market interest rates stabilised.

"Financial market conditions have now settled with long-term interest rates returning to the levels prevailing before the mini-Budget. However, mortgage rates are taking longer to normalise and activity levels in the housing market have shown few signs of recovery," Nationwide's Gardner said.

On Monday, Britain's finance ministry extended by a year a programme that encourages lenders to offer 95% loan-to-value mortgages, which had been due to expire at the end of 2022.

Reporting by David Milliken; editing by William James and Andrew MacAskill

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