LONDON, June 1 Reuters British house prices fell by the most since 2009 in the 12 months to May and the country39;s housing market faces further headwinds after a recent jump in borrowing costs, mortgage lender Nationwide said on Thursday.

Compared with May last year, the average house price was down 3.4 after a 2.7 annual fall in April, Nationwide said.

That was the biggest yearonyear drop since 2009, during the global financial crisis.

House prices edged down by 0.1 in May from April after a monthly 0.4 rise in April, Nationwide said.

The housing market showed signs of recovery in early 2023 after a jump in mortgage rates at the end of last year triggered by former Prime Minister Liz Truss39;s minibudget plans for tax cuts which sent financial markets into turmoil.

However, strongerthanexpected inflation figures published last week caused a fresh rise in bond yields as investors priced in further Bank of England interest rate increases, prompting some lenders to rein in or reprice mortgage offers.

Headwinds to the housing market look set to strengthen in the near term, Robert Gardner, Nationwide39;s chief economist, said, citing the risk that the jump in borrowing costs and mortgage rates could be sustained.

Nevertheless, in our view a relatively soft landing remains the most likely outcome since labour market conditions remain solid and household balance sheets appear in relatively good shape, Gardner said.

Martin Beck, an economist with the EY Item Club, a…