Lawrence White and Iain Withers

LONDON (Reuters), a Nationwide Building Society warning that inflation is accelerating could lead to a collapse in British property prices. It was the strongest indication yet of how the country’s growing housing crisis might end.

British lenders have enjoyed a strong housing market, which was partly driven by increased demand for homes and lifestyle changes due to the pandemic lockdowns. But this will not last forever, Nationwide cautioned.

Nationwide’s outgoing chief operating officer Joe Garner stated that higher inflation has been caused by war in Ukraine and will likely cause a substantial drag on the economy.

He said that there is the possibility of house prices falling due to household budget pressures.

With inflation reaching levels that have not been seen since 1980s, banks are becoming more concerned about the effect of rising prices on household budgets.

In the past, house prices were rising at double-digit rates each year. However, recent signs indicate a slowdown.

Andrew Burrell (Capital Economics chief property economist) stated that while there is sufficient momentum to keep prices from falling in 2022, we believe they will fall by about 5% overall in 2023-4. We also expect transactions to be weaker.

Nationwide is Britain’s 2nd-largest home loan provider. It said that housing activity was higher this year than it was in 2008.

“Whether [inflation pressure]Vicki Harris is the chief commercial officer of Kensington Mortgages.

STABLE PROFIT

Nationwide also issued a warning in conjunction with its annual results. Its pretax profits more than doubled to 1.6 Billion Pounds (or $2.00B) during the year to April 4.

The strong economic recovery that followed pandemic lockdowns and a rise in mortgage lending, helped to lift the country’s finances.

Garner was at the helm for only one more set of results, before Debbie Crosbie (ex-CEO of TSB) takes control on June 2.

Nationwide can compete with big banks in the country, but it’s owned by customers.

Due to the low interest rate and fierce price competition for mortgages, member benefit (a measure of its benefits that it provides above the average market) remained lower than 325 million pounds.

Lloyds (LON :), and NatWest, its listed rivals in the banking sector, reported last month rising profits. But they also warned about a potential hit to growth caused by Britain’s high cost of living crisis.

($1 = 0.8019 pounds)