Higher interest rates ‘could weigh on UK property market’ | Housing market

Nationwide Building Society said there could be a “cooling” of the scorching UK housing market due to rising inflation and interest rates.

Robert Gardner, chief economist of the UK’s second-largest mortgage lender, said the housing market is currently “remarkably strong” despite the end of incentives such as the government’s stamp duty holiday in late September.

However, he said that in the coming months a lot will depend on the performance of the economy as a whole.

“There are some things that could moderate [housing demand] a bit in the next few quarters. For example, there aren’t a lot of homes on the market right now. This may slow down activity.

“If you look at rising inflation squeezing household budgets a bit and interest rates rise, that should have a chilling influence as well. But if the recovery continues, activity should remain fairly solid. “

Earlier this month, Halifax said house prices hit a new high in October, topping an average of £ 270,000 for the first time.

However, as the Bank of England decided this month to keep interest rates at an all-time low of 0.1%, it could increase borrowing costs as early as December, against a backdrop of falling prices. unemployment and rising inflation.

Last month, the Bank’s chief economist Huw Pill said he expected inflation to exceed 5% by the start of next year.

Earlier this week, the Office for National Statistics reported that inflation in October had reached its highest level in a decade. A sharp increase in gas and electricity prices pushed inflation – as measured by the Consumer Price Index – to 4.2%, from 3.1% in September, the highest rate. high since November 2011. The Bank of England’s official inflation target is 2%.

Gardner made his comments as Nationwide reported that its half-year profits at the end of September more than doubled to £ 853million from £ 361million the year before.

Nationwide said it benefited by continuing to lend during the early stages of the coronavirus pandemic, while others have stopped. Profits were also boosted by the release of £ 34million which had been set aside to cover possible losses caused by Covid-19 which did not materialize.

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Joe Garner, chief executive of Nationwide, said its policy of allowing its 13,000 office workers to work from anywhere in the UK was doing “extremely well”.

He said, “We continue to see increased productivity. The area to which we pay particular attention is how to build culture and cohesion [with staff remote working]. “

Nationwide said it operates around 650 branches across the UK, backed by a commitment to keep at least one in each town or city until at least 2023. Sara Bennison, Nationwide’s director of product and marketing, said the company had closed 5% of its branches in the past five years, compared to an average of 30% for large banking competitors.

Garner has expressed a desire to step down as chief executive, but said on Friday there was no update on succession plans.

“I remain fully focused on leadership nationally and will do so until the very last second,” he said.


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