UK house prices fall for sixth consecutive month

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UK house prices dropped for the sixth consecutive month in September, according to mortgage provider Halifax, laying bare the effect of high mortgage rates on the property market as Britons struggle to afford new homes.

The average UK house price was down 0.4 per cent between August and September, extending the slide that started in April.

The fall is a further sign of how raised borrowing costs, linked to higher interest rates, have damped people’s ability to buy homes and dragged down property prices.

Weakness in the property market has rippled through the wider economy, as it hits confidence and households buy fewer home related goods and services, such as furniture or painting.

Compared with the same month last year, house prices were down 4.7 per cent, a steeper fall than the 4.5 per cent contraction registered in August and the largest drop since 2009, Halifax said on Friday.

Kim Kinnaird, director of Halifax Mortgages, said amid the backdrop of higher borrowing costs, “homeowners inevitably become more realistic about their target selling price, reflecting what has increasingly become a buyer’s market”.

House prices boomed during the Covid pandemic, boosted by record-low interest rates, but they are now declining as fewer households can afford a mortgage as the country grapples with a cost of living crisis.

In September, the Bank of England voted to keep the base rate unchanged at 5.25 per cent, ending 14 consecutive increases since November 2021 when it was at a historic low of 0.1 per cent.

However, markets and many economists expect the BoE to hold interest rates at this level — the highest since the financial crisis — until inflation is close to the bank’s target of 2 per cent.

“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,” said Kinnaird. 

The average house price dropped to £278,601, down £15,000 from its peak of £293,500 reached in June last year, but was still £39,200 above the pre-pandemic level of February 2020, according to Halifax.

All UK nations and the nine English regions registered a decline in house prices on an annual basis. Prices are under the greatest downward pressure in the South East of England, falling by an annual rate of 5.7 per cent. London registered the largest drop in cash terms, falling by about £26,514.

Northern Ireland had the most resilient house prices, down by just -0.2 per cent compared with September 2022, a fall of less than £400.

Stephen Perkins, managing director at Norwich-based Yellow Brick Mortgages, said: “There are plenty of properties coming on to the market, but at the moment there are not as many buyers.”