LONDON, Sept 1 Reuters British house prices in August were 5.3 lower than a year earlier, their biggest annual decline since July 2009 as higher interest rates reduced demand from buyers, mortgage lender Nationwide said on Friday.

Prices dropped by 0.8 in August alone, the largest monthly fall since March, after a 0.3 decline in July, Nationwide39;s figures showed.

The softening is not surprising, given the extent of the rise in borrowing costs in recent months, which has resulted in activity in the housing market running well below prepandemic levels, Nationwide Chief Economist Robert Gardner said.

The Bank of England has raised interest rates 14 times since December 2021 to 5.25, and financial markets expect another rate increase this month to 5.5.

Mortgage approvals had been running around 20 below 2019 levels, a trend which looks likely to continue, Gardner said.

Nonetheless, Nationwide expects a soft landing for the housing market as it predicted unemployment would not rise above 5 and wages were growing fast in nominal terms.

Speaking later to the BBC, Gardner said this implied a further fall of only 1 or 2.

However Andrew Wishart, senior property economist at Capital Economics, said he expected house prices had another 5 to fall, taking the total peaktotrough decline to 10.5.

We think the August data marks the start of a significant further drop in house prices, he said, pointing to weakness in the latest Royal Institution of Chartered Surveyors survey,…