(Bloomberg) -- House prices in the UK look set to slide next year as the cost of paying a mortgage is no longer cheaper than renting, according to UBS Group AG.

Mortgage repayments as a proportion of income have increased to more than 40% after hikes to interest rates, analysts Gregor Kuglitsch and Marcus Cole wrote in a note Monday. That’s a “key pinch point” that will result in house prices dropping by 10% next year, they say.

Such a decline could reduce homebuilders’ earnings before interest and taxes by up to 50%, they calculated. Still, with company stock prices already having slid, UBS thinks the decline in valuations may be “overdone.”

The comments came as data from financial information provider Moneyfacts Group Plc showed the average five-year fixed-rate mortgage on a home rose to 6.19%, the highest since November 2009. Mortgage payments in Britain were historically 20%-30% cheaper than renting, the UBS analysts said.

UK interest rates are soaring as the Bank of England attempts to tame spiraling inflation, with last month’s fiscal expansion announced by Chancellor of the Exchequer Kwasi Kwarteng resulting in predictions of even more aggressive hiking by the central bank.

Other analysts have also predicted double-digit declines for house prices, with Credit Suisse Group AG saying they could easily fall 10% to 15%. That’s hurt homebuilder stocks, with a FTSE index tracking companies like Persimmon Plc and Taylor Wimpey Plc having slumped 50% this year. 

UBS pointed to one metric -- price to net tangible asset value -- now being close to a financial crisis-era low to show they may now be attractive for investors.

Read: Homebuilders Drop 50% This Year as Crisis Worsens With Truss

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