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Stuart Trow

U.K. House Prices, Meet the Cost-of-Living Crisis

Britain’s mortgage market is signaling fears of a recession. But big falls in property values look unlikely now that housing is the asset class of the well-off.

The U.K. mortgage market is barking some warnings.

The U.K. mortgage market is barking some warnings.

Photographer: Darren Staples/Bloomberg

The U.K. property market appears in great shape. The Nationwide House Price Index has gained 14% over the past year and rents are rising fast. Supply is tight and borrowing costs remain low despite recent rate increases by the Bank of England. Something, though, is not quite right — and people in a position to know are already pulling their horns in.

The BOE’s latest credit-conditions survey indicated that mortgage providers were planning to reduce the supply of home loans at the fastest rate since the early months of the pandemic in 2020. Back then, lenders withdrew many of their most attractive deals the moment it became clear that lockdown would last considerably longer than initially anticipated. This caused average mortgage rates to rise even as the BOE cut its base rate, first from 0.75% to 0.25% and then to a record low 0.1% in March 2020.