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UK house prices expected to fall as mortgage rates soar

According to Halifax, rising mortgage costs and the broader cost of living crisis will push UK house prices down more sharply in the coming months after prices dipped 0.1% in September.

Halifax said the market had been almost flat since June but was now heading into a more significant slowdown as rapidly rising borrowing costs made buying a property unaffordable for more people.

“The housing market may have already entered a more sustained period of slower growth,” said Kim Kinnaird, the director at Halifax Mortgages. “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.”

Earlier this week, the average five-year fixed-rate mortgage breached 6% for the first time in 12 years, while the average two-year fixed rate has passed the mark for the first time since 2008. Property experts have predicted that average house prices in the UK could fall by at least 10% next year.

About 1,000 deals have been pulled from the market in recent weeks after Kwasi Kwarteng’s mini-budget triggered a sell-off in financial markets and raised expectations for even higher interest rates.

The average new two-year fixed rate – which was 4.74% on the day of the mini-budget – had climbed to 6.16% on Friday, according to the data firm Moneyfacts. It was a similar story with five-year fixes, with the average rate on Friday standing at 6.07%.

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