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UK House Prices Slip From Record After Mortgage Rates Jump

(Bloomberg) -- UK house prices pulled back from their record level in November, official data showed, adding to evidence that the market may be entering a more protracted downturn.

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The average cost of a home fell to £295,000 in November, down by £1,000 from the month before but £28,000 more than a year ago, the Office for National Statistics said Wednesday.

Mortgage lenders say prices based on their lending books have been declining for the past four months, the longest slump since 2008. The ONS data reflects completed sales and lags by a few months but provides a more complete picture of the market.

House prices climbed by 10.3% in the year to November, according to the ONS data, slower than the 12.4% pace in the year to October.

Rapid hikes in the Bank of England’s key interest rate bump up the cost of mortgages, and the cost-of-living crunch prompts households to hold onto their cash. The ONS said rental costs hit a record in the latest month.

Asking prices for British homes slipped in both November and December, separate data from property portal Rightmove showed last week, though its figures for January indicated sellers were beginning to step up their demands again.

The Bank of England has hiked interest rates back-to-back at its last nine meetings, the quickest monetary tightening in three decades.

Figures this morning showed inflation was 10.5%, five times the BOE’s 2% target. Investors expect a further 50 basis-point hike in the central bank’s key rate next month.

Nationwide Building Society is predicting a 5% fall in house prices this year, while Halifax thinks 8%. Economists at Bank of America think prices could slide 10% peak to trough, with the low point coming toward the end of this year.

The average house price in England is now £315,000, while in Wales it is £220,000, Scotland £191,000 and Northern Ireland £176,000.

London has typically seen some of the largest rates of house price growth across the country, but the pandemic put a damper on as prospective buyers looked for homes outside the city during lockdowns.

In the 12 months to November, the capital was the region in England with the lowest annual house price growth at 6.3%, while the North West was highest at 13.5%.

(Updates with details from the fourth paragraph.)

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