The full disastrous scale of the fallout from Kwasi Kwarteng’s mini-Budget was laid bare today as it emerged that house prices fell at their fastest rate since the depths of the pandemic last month while demand for mortgages halved.
Britain’s biggest building society Nationwide said the average prices of a home in the UK slipped 1.4% in November, the sharpest monthly drop since June 2020. The annual rate of growth is down to 4.4%, the lowest since August 2020.
The lender’s chief economist Robert Gardner said: “The fallout from the mini-Budget continued to impact the market.”
Meanwhile shares in quoted home loan brokers Mortgage Advice Bureau lost a fifth of their value after it issued a profit warning over the extraordinary collapse in business during the turmoil that followed the former Chancellor’s speech on 23 September.
Fears about the impact of his “Growth Plan” on the public finances sent gilt yields soaring at unprecedented rates and led to hundreds of mortgage deals being pulled.
The company, which has 2000 advisers, said today “These extreme market and lending conditions severely impacted activity levels across all of the group’s product lines, with written business in October and November circa 50% below expected levels. The reduction in mortgage activity and new house sales is expected to persist until early 2023, after which activity levels are expected to start to slowly build.”
CEO Peter Brodnicki said: “The consequences of the so-called mini-budget have been quick and far-reaching. Overnight our market moved from being fairly stable and reasonably confident, to almost the polar opposite. The sudden and unexpected pace of mortgage rate increases, combined with the tightening of mortgage lending criteria, have resulted in some customers pausing both home-moving and re-financing plans.”
Profits next year will be “considerably impacted” by the downturn the company said.
Market fixed mortgage rates are gradually subsiding since the chaos of late September and early October sent them sky high but they remain well above pre- mini Budget levels.
Today analysts Moneyfacts said average two year fixed rates were at 6.01 %, down 5 basis points on yesterday. Average five years fixes fell 7 bps from 5.87% to 5.8%. However on the day of the mini-Budget rates stood at 4.24% and 4.33% respectively.
Iain McKenzie, CEO of The Guild of Property Professionals, said: “November saw the biggest fall in house prices since the country was plunged deep into lockdown two years ago, but this shouldn’t come as a surprise after months of economic upheaval.
“When this happened before, the Government introduced the stamp duty holiday, giving the market the shot in the arm it needed to incentivise people to buy.
“Another version of the Help to Buy would go a long way towards giving the necessary support for first-time buyers, but it needs to be made available to all types of properties.”
But London agents said they were seeing demand return after political and economic stability was restored by the change in Prime Minister and Chancellor. Matthew Thompson, head of sales at Chestertons, said exchanges were up 23% in November compared with last year. The agency expects London prices to flat-line for most of next year before starting to bounce back in the fourth quarter.