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Housing: UK house prices suffer sharpest fall in 14 years

UK house prices suffered their sharpest annual drop in 14 years, as the seasonal summer slump and high mortgage costs dragged on sales.

Data released by Halifax, Britain’s biggest mortgage lender, showed that prices fell by 4.6% in August, marking the biggest year-on-year decrease since 2009.

It means that the price tag of the typical UK home has dropped by about £14,000 over the past 12 months to £279,569. That is the lowest level since early 2022, but still leaves average prices £40,000 higher than before the pandemic, when lockdowns fuelled demand for larger homes in a “race for space”.

The latest annual decline, however, suggests homeowners continue to be deterred by high-interest rates, which have been hiked by policymakers in an attempt to combat inflation but have fuelled higher mortgage costs.

The Bank of England has raised interest rates 14 times since December 2021 to 5.25%, pushing the average rate on the two-year fixed-rate mortgage to about 6.67%, according to the latest figures from Moneyfacts.

Kim Kinnaird, director of Halifax Mortgages, said a traditional slowdown in house buying over the summer months also played a role in last month’s slump. “Market activity levels slowed during August, and while there is always a seasonality effect at this time of year, it isn’t surprising given the pace of mortgage rate increases over June and July.

“While these did ease last month, rates remain much higher than recent years. This may well have prompted prospective buyers to defer transactions in the hope of some stability, and greater clarity on the future direction of rates in the coming months.

“The market will continue to rebalance until it finds an equilibrium where buyers are comfortable with mortgage costs in a higher range than seen over the previous 15 years,” Kinnaird said.

Halifax is predicting a further fall in property prices into the new year, and while the trend is unlikely to be welcomed by current homeowners, Kinnaird said it may come as a relief to those hoping to get on to the property ladder, who have more purchasing power due to rising wages.

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