Britain’s Nationwide warns inflation surge could dent house prices
2022.05.20 13:46
FILE PHOTO: A man walks past a Nationwide Building Society in London, Britain, May 22, 2019. REUTERS/Hannah McKay
By Lawrence White and Iain Withers
LONDON (Reuters) – Nationwide Building Society said on Friday rocketing inflation could send British house prices into reverse, in one of the clearest warnings yet that the deepening cost of living crisis could bring the country’s housing boom to an end.
British lenders have benefitted from a buoyant housing market – partly fuelled by pent-up demand and lifestyle changes after pandemic lockdowns – but this may not last, Nationwide warned.
“The emergence of higher inflation, which has been exacerbated by the war in Ukraine, is likely to exert a significant drag on the economy in the near term,” Nationwide’s outgoing chief executive Joe Garner said.
“There is a risk of a downward movement in house prices, given the pressure on household budgets,” he added.
Banks have become increasingly wary of the impact of higher prices on household budgets, with inflation at levels not seen since the 1980s.
House prices have been increasing at double-digit rates annually, but there have been signs of a recent slowdown.
“We think there is enough momentum in the market currently to prevent outright falls in 2022, but we expect prices will drop by around 5% in total in 2023-4 and also that transactions will be much weaker,” said Andrew Burrell, chief property economist at Capital Economics.
Nationwide, which is Britain’s second-largest provider of home loans, said housing activity remained higher than pre-pandemic levels this year.
“Whether [inflation pressure] turns into an actual reduction or drop in house prices, remains to be seen over the coming months,” said Vicki Harris, chief commercial officer at Kensington Mortgages.
STRONG PROFIT
Nationwide’s warning came alongside its annual results, which showed its pretax profits nearly doubled to 1.6 billion pounds ($2.00 billion) for the year to April 4.
Its finances were lifted by a strong economic recovery from pandemic lockdowns, including a 6.9 billion pound leap in gross mortgage lending.
It was Garner’s last set of results at the helm before former TSB CEO Debbie Crosbie takes over on June 2.
Nationwide competes with the country’s big banks but unlike them is owned by its customers.
The lender said member benefit, a gauge of benefits it offers above the market average, remained below its target at 325 million pounds due to low interest rates and strong price competition in mortgages.
Its listed bank rivals Lloyds (LON:LLOY) and NatWest last month reported rising profits but warned of a possible hit to growth from Britain’s cost of living crisis.
($1 = 0.8019 pounds)
