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UK house prices at risk as inflation rises and cost of living crisis hits, Nationwide boss warns

House prices at risk as borrowing and purchasing power hit hard, warns Nationwide BS chief, despite windfall gains

Home prices are at risk as purchasing power will take a big hit, the head of the Nationwide Building Society has warned.

Joe Garner said higher prices and interest rates, coupled with steep increases in the cost of living, mean buying a home will be more difficult. He said: ‘Higher inflation, which has been exacerbated by the war in Ukraine, is likely to exert a significant drag on the economy in the short term.

“It will put significant pressure on family budgets, especially for those with lower incomes who also accumulated less savings during Covid-related closures.”

Pressure: Joe Garner said higher prices and interest rates, coupled with steep cost-of-living increases, mean buying a home will be more difficult

Pressure: Joe Garner said higher prices and interest rates, coupled with steep cost-of-living increases, mean buying a home will be more difficult

He added that that could also result in a drop in house prices. His comments came as the UK’s largest mutual reported that its annual profit almost doubled thanks to buoyant demand for mortgages.

Even though unemployment hit an all-time low this week, rising costs are putting pressure on people’s pockets, leaving shoppers with less cash to save for a deposit.

Victoria Scholar, chief investment officer at Interactive Investor, said the uncertain outlook meant new Nationwide boss Debbie Crosbie, who will replace Garner in June, had a “difficult task on her hands” as she geared up for “a series of of headwinds: the cost of living crisis, spiraling inflation, a housing market at its peak and the deteriorating economic outlook.’

The gloomy outlook overshadowed Nationwide’s record results: a £1.6bn profit for the year to April 4, more than double the previous year’s £790m.

The increase was attributed to a sharp rise in interest income on mortgages taken out early in the pandemic. Mortgage lending rose to £36.5bn from £29.6bn in the year, allowing it to capture a larger market share.

Activity in the housing market is above pre-pandemic levels, with prices rising at double-digit rates so far in 2022.

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