Average house prices in the UK saw a slight fall in September, the second marginal decrease over the past three months, according to Halifax’s latest house price index.
With prices decreasing 0.1% on a monthly basis, this puts the average property price at £293,835.
The annual growth pace also slowed for the third month in a row, to 9.9% from 11.4%, returning to single digits for the first time since January.
Of all regions, Wales remains at the top of the table for annual house price inflation with a rate of 14.8%, down from 15.8% in the previous month, and an average property cost of £224,490.
The West Midlands has now overtaken the South West to record the strongest rate of annual growth in England, with house prices rising by 13.3% over the last year, down slightly from 13.5% the previous month.
Over that period, prices have risen by £30,000, with an average property now costing £255,822.
The pace of annual house price growth in Northern Ireland eased back further last month to 10.9% from 12.5%, with a typical home now costing £184,570.
Scotland also saw a further slowdown in the rate of annual house price inflation, to 8.5% from 9.3%, with homes costing an average price of £204,305, largely unchanged from the previous month.
London still has the slowest rate of annual growth amongst the UK nations and regions, with house prices rising by 8.1% over the last year, however, with a typical home costing £553,849 the capital’s average property price remains by far the most expensive in the country.
Halifax Mortgage director Kim Kinnaird says: “The events of the last few weeks have led to greater economic uncertainty, however in reality house prices have been largely flat since June, up by around £250.”
“Predicting what happens next means making sense of the many variables now at play, and the housing market has consistently defied expectations in recent times.”
“While stamp duty cuts, the short supply of homes for sale and a strong labour market all support house prices, the prospect of interest rates continuing to rise sharply amid the cost of living squeeze, plus the impact in recent weeks of higher mortgage borrowing costs on affordability, are likely to exert more significant downward pressure on house prices in the months ahead.”
Quilter mortgage expert Karen Noye explains: “After years of prices defying expectations in the face of serious economic uncertainty from the Covid-19 pandemic it seems that inflation and ever-increasing interest rates will be the straw that breaks the camel’s back.”
“It remains to be seen how far house prices might drop but some of the housebuilders are pricing in a 20% drop, which could be an overreaction, but it is certainly not out of the question.”
“House prices have become bloated in recent years having benefited from government policies such as the stamp duty holiday during the pandemic at a time when borrowing was very cheap. Now the cost of borrowing is on the rise, the stamp duty cut recently brought in by Truss may serve to steady a sinking ship but it’s still likely to take on a huge amount of water.”
MT Finance director Tomer Aboody comments: “Where demand outstrips supply and borrowing is cheap, people will stretch themselves to buy. That’s what we’ve been seeing over the past couple of years, pushing property prices to new highs.”
“However, rates are rising, with some predicting they will hit 6%. While nobody knows for sure whether that will come to pass, rates could stabilise around 4% over the next couple of years, meaning those coming to the end two or five-year fix could find their mortgage payments double. That will be a big hit to absorb in the family finances.”
“There are hard times ahead and many people may have to downsize because they can’t afford the home they bought when interest rates were at rock-bottom. Stamp duty reductions targeted at those who need to sell and find something smaller would make a lot of sense.”
Coreco managing director Andrew Montlake adds: “We need to get used to house price decreases because it’s hard to see the market going in any other direction with mortgage rates where they now are and the fact sentiment among buyers has been hit for six.”
“There are so many variables at play in the property market right now you need a Silicon Valley algorithm to make sense of it all, but the overriding theme is uncertainty and a hell of a lot of it. There’s no doubt now that a lot of prospective buyers will either have to look at smaller homes due to the new era of mortgage rates, or will put things on hold full stop until there is more clarity and things have calmed down.”
“House prices are set to come under real pressure but the sizeable drops of 10%-15% that some are predicting are frankly unrealistic given the lack of supply. Prices are far more likely to flatline than go through the floor. If there’s one thing everyone can agree on, it’s that the age of dirt cheap money has been relegated to the dustbin of history.”
