LONDON, Dec 20 Reuters British house prices look on track to drop by about 5 next year, as homebuyers face higher interest rates, a squeeze on disposable income and a potential rise in unemployment, mortgage lender Nationwide Building Society said on Tuesday.

The risks are skewed to the downside, but there is still a good chance that we can achieve a relatively soft landing next year with activity stabilising modestly below prepandemic levels and house prices edging lower, perhaps by around 5, Nationwide39;s chief economist, Robert Gardner, said.

Last week rival mortgage lender Halifax forecast a fall of around 8 for 2023 and the government39;s Office for Budget Responsibility in November predicted that prices would slide by 9 by late 2024.

British house prices rose by more than a quarter in the two years after the onset of the COVID19 pandemic as people sought more space to live and took advantage of low borrowing costs and tax incentives.

However, prices have now started to fall, with Nationwide reporting three consecutive monthly drops in average house prices for the first time since 2008.

Financial market turmoil in late September and early October added to the slowdown, as many lenders temporarily withdrew mortgage offers until market interest rates stabilised.

Financial market conditions have now settled with longterm interest rates returning to the levels prevailing before the miniBudget. However, mortgage rates are taking longer to normalise and activity…