The Halifax House Price index showed a 0.1% decrease in the average property in September mean the cost of a typical home has crept down to £293,835 from August’s record high.
Annually house prices increased by 9.9% but this is down on the 11.4% year-on-year growth seen in August.
Kim Kinnaird, director, Halifax Mortgages, said: “The events of the last few weeks have led to greater economic uncertainty, however in reality house prices have been largely flat since June, up by around £250.
“This compares to a rise of more than £10,000 during the previous quarter, suggesting the housing market may have already entered a more sustained period of slower growth.”
And she thought this downward trend may continue. “Predicting what happens next means making sense of the many variables now at play, and the housing market has consistently defied expectations in recent times,” she said.
“While stamp duty cuts, the short supply of homes for sale and a strong labour market all support house prices, 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.”
Today’s drop in house prices had been widely predicted following the property market boom which had been created by the stamp duty holiday during the pandemic. Rising inflation and interest rates which have been building for the last year seemed unable to topple prices.
Karen Noye, mortgage expert at Quilter, said whilst the fall in house prices was only marginal it showed the ‘tidal wave’ of economic issues facing the UK looked likely to drag house price down with it.
“After years of prices defying expectations in the face of serious economic uncertainty from the Covid-19 pandemic it seems that inflation and ever-increasing interest rates will be the straw that breaks the camel’s back,” she said.
What does the fall in house prices mean for potential buyers and owners?
Karen explained rising interest rates make mortgages less affordable. This, she explained would, prompt more people to put their houses on the market so they can downsize and achieve lower monthly payments.
“When more houses hit the market there is naturally more choice and crucially more room for bargaining.
“The seller’s market, we’ve been witnessing for the past few years quickly becomes a buyer’s market.
“The problem is buyers are also struggling massively with the cost-of-living crisis so demand is also set to soften, therefore those that can still afford to move will have more choice and more leverage to put in lower offers and house prices drop.”
Will falling house prices help first-time buyers?
Rising interest rates mean first-time buyers who are still saving for their deposit will be benefiting from better rates, although the value is being eaten up by inflation.
Will today’s house price news mean they can benefit from more affordable prices?
Karen said: “First-time buyers might be somewhat buoyed by the news house prices are dropping but the affordability problems associated with getting a mortgage remain incredibly difficult.
“The rise in interest rates could spur more innovation in the mortgage market particularly for first-time buyers who could be completely locked out of owning a home as rates increase.”
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