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UK house prices flat after four-month fall

According to Halifax, UK house prices were roughly flat in January, having fallen in the previous four months.

Average prices were stable at £281,684 last month, the lender said, after sharp falls of 1.3% in December and 2.4% in November.

However, the annual growth pace in house prices slowed to 1.9% from 2.1% in December, marking the lowest rate since October 2019, as higher mortgage rates and the broader cost of living crisis have dampened demand. The average house price is about £12,500, or 4.2%, below its peak in August, although it remains about £5,000 higher than a year ago.

The housing market has slowed across all nations and regions and is expected to slow further this year, and many forecasters expect price falls of up to 20%. Halifax predicts a drop of 8% this year.

“We expected that the squeeze on household incomes from the rising cost of living and higher interest rates would lead to a slower housing market, particularly compared to the rapid growth of recent years,” the director of Halifax Mortgages, Kim Kinnaird, said. “As we move through 2023, that trend will likely continue as higher borrowing costs lead to reduced demand.”

She said lower prices could make it more affordable for people to climb the housing ladder as the year went on.

“For those looking to get on or up the housing ladder, confidence may improve beyond the near term. Lower house prices and the potential for interest rates to peak below the level anticipated last year should improve the home buying affordability over time.”

Soaring inflation prompted the Bank of England to raise interest rates to 4% last week, the 10th rise in a row, piling more pressure on mortgage holders and businesses struggling to pay off their loans. The Bank said inflation “is likely to have peaked”, and a recession would be less severe than previously predicted. However, it added that Brexit was damaging the economy faster than it had anticipated.

Jeremy Leaf, a north London estate agent, said: “It was inevitable that the shock of the mini-budget at the end of September, which prompted a steep rise in mortgage rates and the inexorable increase in the cost of living, would have an impact on the housing market.

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