U.K. house costs to decrease by up to 10% in 2023, Lloyds Bank CEO stated

January 18, 2023: U.K. house prices will fall by up to 10%, as higher mortgage rates and the broader cost of living crisis curtail home purchasing, Lloyds Bank CEO Charlie Nunn told on Tuesday.

The British housing firms have been under pressure after former prime minister Liz Truss’ disastrous “mini-budget”, which provoked lenders to take over 40% of all mortgage things from the U.K. market between concerns over spiking interest prices.

The U.K. property sector remained sluggish recently as the Bank of England kept hiking interest rates aggressively to reel in double-digit inflation. The country was projected to be entering its most prolonged recession on record.

Inflation hit 10.7%, and the Bank has hiked prices at nine consecutive policy meetings to lift its introductory rate from 0.1% to 3.5%. Further increases are expected in the future months.

On Monday, a report from the British property website Rightmove showed asking prices for homes increased slightly in January for the initial time in two months.

“Our base case for this year is we will have a slump, a mild recession GDP of about -0.1% this year, unemployment which stays strong, and that’s more as of the constraints on the supply side, interest prices about 4% and a recovery into 2023,” Nunn stated on the sidelines of the World Economic Forum in Switzerland.

“The different challenge many of our customers are focused on is house prices, and we see house prices softening by 8-10% this year.”

The independent Office for Budget Responsibility forecast that U.K. households encounter their sharpest decline in living standards on record. As the head of the significant retail and commercial, financial services firm in the U.K., Nunn showed Lloyds was seeing a “tale of two stories.”

“Initially, there is a relatively small but significant group of customers with mortgages and without who are moving to struggle to make ends meet in the cost of living. That’s re 1% of customers we can see in the U.K., and we need to focus on supporting them,” he said.

“We’re seeing a much significant set of customers which have to adapt their spending and adapt to higher costs of living and higher mortgage spend, but there still is resilience in businesses, in households and individuals at the higher income levels in the U.K. and strong which spends we’re seeing going through.”