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The downward pressure on house prices is likely to last into next year, the lender Halifax has warned this morning, after reporting that UK house prices fell for the sixth month running in September.
The average property price dropped by 0.4% last month, a smaller fall than in August, when it shrank by 1.8%.
On an annual basis, prices fell by 4.7%, an acceleration on August’s 4.5% drop.
Recent house price falls mean the average UK home has now dropped to levels seen in early 2022, at about £278,601.
They are now 1% above their level in December 2021, when the Bank of England started raising interest rates – but almost £40,000 above their pre-pandemic levels.
Prices have cooled after the jump in mortgage rates in 2022 and 2023. Although mortgage costs have fallen recently, demand from buyers may remain.
Kim Kinnaird, the director of Halifax Mortgages, said: “Activity levels continue to look subdued compared to recent years, with industry data showing lower levels of new instructions to sell homes and agreed sales. Borrowing costs are the primary factor, given the impact of higher interest rates on mortgage affordability. Against this backdrop, homeowners inevitably become more realistic about their target selling price, reflecting what has increasingly become a buyer’s market.
"However, with base rate now likely to be at or around its peak, we are seeing fixed rate mortgages deals ease back from recent highs. Wage growth also remains strong, which has helped with affordability, with the house price to income ratio now at its lowest level since June 2020 (6.2 in September v 6.3 in August).
"Many economists and financial markets predict that base rate will remain higher for longer, with any significant cuts appearing unlikely until inflation gets closer to the Bank of England’s 2% target. Overall, these factors are likely to keep mortgage rates elevated in comparison to recent years, constraining buyer demand and putting downward pressure on house prices into next year.”
House prices have fallen in all UK nations and the nine English regions, on an annual basis.
They are falling fastest in the south-east of England, and slowest in Northern Ireland.
Halifax said: "Prices are under the greatest downward pressure in the south-east of England, falling by -5.7% over the last year (average house price of £376,450). Northern Ireland currently has the most resilient house prices, down by just -0.2% compared to this time last year (average house price of £184,108), a fall of less than £400.
"Scotland also experienced a relatively modest annual decline of -0.8% (average house price of £201,594). Wales saw property prices fall by -3.6% over the last year (average house price of £214,585). London remains the most expensive place in the UK to purchase a home, with an average property price of £525,678.
"With prices down by -4.8% over the last year, it has seen the biggest fall of any region in cash terms (-£26,514)."
Meanwhile, financial investors worldwide are bracing for the latest US jobs report, due at lunchtime UK time.
September’s non-farm payroll is expected to show a small slowdown in hiring, with about 170,000.
However, a strong report may alarm markets, as it would encourage the US central bank, the Federal Reserve, to raise interest rates again.
The agenda
• 9am BST: UN food price index
• 1.30pm BST: US non-farm payroll for September
We’ll be tracking all the main events throughout the day ... |
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