Household budget pressures could push house prices down

Its predictions come from the building society’s latest financial results, which also state it expects the rate of house price growth to “moderate” in the coming quarters and could result in a drop in house prices. 

This comes off the back of strong housing market activity, which has remained higher than pre-pandemic levels with the Nationwide House Price Index recording a 14.3% increase in house prices year on year. 

Based on this, it’s no surprise that the firm’s gross mortgage lending went up - increasing from £29.6bn in 2021 to £36.5bn in 2022, and supported 87,000 first-time buyers into homes.  

Overall, the firm expects that - despite a period of economic growth and stable credit performance - the continued inflationary pressures will put more pressure on personal finances. Increases in National Insurance contributions and the energy price cap will also likely put disposable income under more strain in the coming months. 

This increased pressure on household budgets due to higher inflation - exacerbated by Russia’s invasion of Ukraine - will impact those on lower incomes in particular who have accumulated fewer savings during Covid-related lockdowns. 

Looking at Nationwide’s results in 2021/22 as a whole, the firm recorded an increase in statutory profit before tax - going up from £823m to £1.5bn. Its net interest income increased by £416m to £32.5bn, while its net interest went up from 1.21% to 1.26%. 

The building society’s net other income increased by £166m to £305m, in part reflecting a return to pre-pandemic spending behaviours over the past year as pandemic restrictions have eased.