House prices to slump 10pc, warns Santander

Simon Foy
·2 min read
House Prices
House Prices

House prices will fall by a tenth this year, Santander has warned as the lender braces for a rise in mortgage and loan defaults amid a darkening economic outlook.

The high street lender said it expects UK house prices to fall back to 2021 levels in 2023 as rising interest rates hit demand for mortgage lending.

The UK arm of the Spanish bank also set aside £321m to cover bad loans as it warned that Britain is likely to face a recession, which could see customers fall into arrears.

This compares with £233m of credit provisions being released a year earlier as Covid restrictions were lifted.

Santander said: “We expect house prices to fall back to 2021 levels over the year ahead as higher base rates dampen demand.”

It added: “The outlook remains uncertain as inflation has eroded real disposable income with the prospects of a recession ahead. These challenges for households and businesses are expected to continue into 2023 and could impact credit quality.”

Santander’s forecast that house prices will fall by a tenth comes after Lloyds and NatWest both predicted in October that prices were likely to tumble by 7pc to 8pc this year.

The higher provisions for potential defaults weighed on the bank’s pre-tax profits, which rose just 2pc to £1.89bn for 2022 despite rising interest rates.

Mike Regnier, chief executive of Santander UK, said: “The global economic environment and rising cost of living have presented challenges for many of our customers and clients.”

“The end of 2022 saw a marked slowdown in mortgage lending and, with an uncertain economic outlook for 2023, we will continue to focus on a prudent approach to risk while we help people and businesses prosper.”

In December, Santander was fined £108m by the City watchdog after it found serious and persistent gaps in the bank’s anti-money laundering safeguards.

Around £300m passed through Santander accounts over a five-year period, potentially by criminals taking advantage of its “inadequate” controls, the Financial Conduct Authority said.