Average house prices in the UK fell at their sharpest level for over 18 months slipping by 0.4% to £292,598 on a monthly basis in October, as would-be buyers paused in the face of a post-pandemic slowdown and the “shock” of the mini-budget, according to Halifax’s latest house price index.  

Last month’s fall was the third in the past four months, topping September’s 0.1% monthly downturn, and lowering the annual growth rate to 8.3% in October, from 9.8% the prior month.  

All English regions, apart from the North East, experienced weaker annual price inflation in October compared to September. However, the West Midlands now has the joint highest annual growth of any UK region at 11.7%, matching Wales.  

Scotland saw its pace of annual house price inflation slow to 7.5%, while house prices in Northern Ireland eased to 9.5% year-on-year. In London, annual property price inflation slowed to 6.8%.  

Halifax Mortgages director Kim Kinnaird Director says: “While a post-pandemic slowdown was expected, there’s no doubt the housing market received a significant shock as a result of the mini-budget which saw a sudden acceleration in mortgage rate increases.   

“While it is likely that those rates have peaked for now – following the reversal of previously announced fiscal measures – it appears that recent events have encouraged those with existing mortgages to look at their options, and some would-be homebuyers to take a pause.”  

“Understandably we have also seen consumer caution grow, as industry data shows mortgage approvals and demand for borrowing declining.”  

Kinnaird points out that although “the recent period of rapid house price inflation may now be at an end” average property prices have risen more than £22,000 over the past 12 months, and by almost £60,000, or 26%, over the last three years.  

Coreco managing director Andrew Montlake says: “I’ve never seen property market sentiment change in such a short timeframe. The property market was hit for six after the now infamous mini-budget as mortgage rates soared and many people put their buying plans on hold due to the extreme political uncertainty.   

“House prices are set to come under further pressure during the winter months, but the sizeable drops of 10% to 15% that some are predicting are frankly implausible given the sheer lack of supply and the fact that the jobs market is still strong.   

“A nationwide correction of around 10% is a real possibility after last week’s rate rise by the Bank of England [of 75 basis points to 3%]. In reality, a fall of 10% is just the froth coming off the market and a reversal of the unsustainable growth we have had since the stamp duty holiday mid-pandemic.”  

Quilter mortgage expert Karen Noye adds: “It remains to be seen just how far house prices might drop, but there are several factors that could have an impact. Many are looking to the autumn budget for clarity, and the market reaction could help to reduce inflation in the longer term and put a halt to rising interest rates. However, the number of people facing huge increases in their mortgage payments is growing and could become unmanageable for some.  

“One of the few policies left standing from the mini-budget was the cut to stamp duty. If this remains in place as expected, it could lower the size of the house price drop as people may opt to take advantage of the tax saving despite the economic backdrop. However, soaring inflation, rising interest rates and high energy bills are putting a hold on many people’s plans to move.  

“Ultimately, costs are rising across the board and as the winter draws in and the real impact of rising energy bills hits, people’s finances will be stretched even further. With mortgage rates rising, many people will need to reconsider moving home and could opt to stay put to ride out the cost-of-living crisis instead, while others will need to move into cheaper properties. As demand falls and the level of stock increases, we will no doubt see a further drop in house prices.”  

Hargreaves Lansdown senior personal finance analyst Sarah Coles points out: “The housing market doesn’t always move in a straight line, but clearly a downward trend is developing.   

“We’re not getting near the realms of price falls yet, with annual growth still at 8.3%, but given it has fallen back from a peak of 12.5% in June, it would be foolish to rule out significant annual price drops in the coming months.  

“While mortgage rates have eased very slightly as mini-budget measures were rolled back and Trussenomics was consigned to history, the chaos has taken a toll. It’s not just that rates are now higher, but buyers have had an unsettling shock, which could have a long-lasting impact on their willingness to take the plunge.   

“Royal Institution of Chartered Surveyors figures show buyer demand is sliding, and the Bank of England reported that mortgage approvals have fallen. Things are likely to feel even dicier now that the Bank has issued such a dire warning of [a record two-year] recession.”