The mortgage lender’s latest house price index showed values have dropped by 1.9% in August alone but over the last year they have plunged by 4.6% – the biggest annual decrease since 2009.
It means the average house price is now £279,569 – down by around £14,000 in cash terms over the last year.
Whilst the fall in prices will count as a financial loss to homeowners, for those trying to get onto the housing ladder the decrease offers a glimmer hope.
Kim Kinnaird who is director of Halifax Mortgages explained that because income growth has remained strong recently, the house price to income ratio for first-time buyers has fallen.
“This is the most affordable level since June 2020,” she said, “and will be partially offsetting the impact of higher mortgage costs.”
Mortgage rate rises: How they are impacting house prices
Ironically, it’s the high price of mortgages – a factor which will also be posing a challenge to first-time buyers – which is responsible for the drop in house prices.
Kinnaird said: “It’s fair to say that house prices have proven more resilient than expected so far this year, despite higher interest rates weighing on buyer demand.
“However, there is always a lag-effect where rate increases are concerned, and we may now be seeing a greater impact from higher mortgage costs flowing through to house prices.
“Increased volatility month-to-month is also to be expected when activity levels are lower, though overall the pace of decline remains in line with our outlook for the year as a whole.”
Another factor influencing the dip in prices was the fact it was August – a time which is typically quiet when it comes to house sales.
Kinnaird added: “We do expect further downward pressure on property prices through to the end of this year and into next, in line with previous forecasts.
“While any drop won’t be welcomed by current homeowners, it’s important to remember that prices remain some £40,000 (+17%) above pre-pandemic levels.”
What’s the homebuying market looking like?
Estate agents said the dip in prices over August was in line with the traditional summer slowdown and demand has slowed during the season.
Nicky Stevenson, managing director at national estate agent group Fine & Country, thinks demand will grow again as we head into autumn.
“Mortgage lenders are competing for business again and bringing down their mortgage rates accordingly, which will ease pressure on homebuyers and will further prop up demand over the coming months,” she said.
“If a pause in base rate rises does materialise this year, this should further boost buyer confidence.”
