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UK house prices experience annual fall for first time in decade

According to Halifax, UK house prices have experienced their first annual fall in more than a decade, in a sign that the impact of soaring interest rates on household budgets has halted the country’s long housing boom.

The cost of the average home last month was 1% lower in May than in the same month last year, marking the first time that prices have fallen year-on-year on the lender’s monthly report since December 2012.

The figures come as the turmoil in the mortgage market shows no sign of abating, with banks and building societies continuing to pull home loans from their shelves, often with very little notice, and hike the cost of their fixed-rate deals.

On Wednesday, Halifax Intermediaries, the arm of the high street bank that serves brokers, increased some of its fixed-rate deals by up to 0.82 percentage points – a two-year fix for that remortgaging who previously had a rate of 4.9% is now priced at 5.72%. On Thursday, Santander’s broker arm will increase the cost of more of its fixed deals, with some rates rising by up to 0.33 percentage points.

The slump in the housing market has been precipitous over the past year as stubbornly high inflation remains at 8.7%, and 12 increases in a row in the UK base interest rate wreak havoc on the mortgage market. Just last summer, Halifax had the annual rate of house price growth running at more than 12%.

“As expected, the brief upturn we saw in the housing market in the first quarter of this year has faded, with the impact of higher interest rates gradually feeding through to household budgets, and in particular those with fixed rate mortgage deals coming to an end,” said Kim Kinnaird, the director at Halifax Mortgages.

“This will inevitably impact confidence in the housing market as buyers and sellers adjust their expectations.”

The monthly change in the average price of a UK home remained almost flat in May at £286,532; the lender said – in April, they fell 0.4% compared with March – with prices down about £7,500 on average compared with last summer’s peak.

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