House Prices Slip as Bank of England Raises Interest Rates

A further slowdown in annual house price growth was reported last month by Nationwide. January house prices fell by 0.6% compared to December, bringing the annual growth rate down to 1.1% from 2.8% in December. Despite some encouraging signs of normalizing mortgage rates, Nationwide’s Chief Economist, Robert Gardner, stated that it is too early to determine if the housing market has started to recover. The economic outlook remains challenging with a projected decrease in real earnings and a weakened labor market.

The latest report was released ahead of the Bank of England’s decision to increase interest rates by 0.5 percentage points, bringing the Bank Rate to 4%. The Bank believes that the recent increases in Bank Rate will have a growing impact on the economy in the coming quarters. Global consumer price inflation remains high, but is expected to have peaked in many advanced economies, including the UK. Inflation is projected to decrease significantly by the end of 2023.

Despite these projections, the Bank acknowledges there are uncertainties in the medium-term outlook and the potential for further interest rate increases to reach 4.5% by mid-2023. However, inflation is expected to drop significantly by the end of the year.