The house price index recorded a 0.1% drop in property values in June whilst, over the year, they fell by 2.6%.
It means the average home in the UK now costs £285,932 compared to £293,992, when it hit the peak in August last year.
Kim Kinnaird, director at Halifax Mortgages, explained the annual drop of 2.6% – or £7,500 in cash terms – was the largest year-on-year decrease since June 2011.
“With very little movement in house prices over recent months, this rate of decline largely reflects the impact of historically high house prices last summer,” she explained.
Indeed, annual growth peaked at 12.5% in June 2022 – largely due to the stamp duty holiday.
But she acknowledged the recent mortgage rate hikes which have made borrowing much more expensive for homeowners will have played a role in the house price decline.
“The housing market remains sensitive to volatility in borrowing costs,” she said. “Concerns about persistent inflation have led to a significant increase in the cost of funding. Coupled with base rate rising by another 50bp, this contributed to a big jump in typical mortgage rates over the last month.
“The resulting squeeze on affordability will inevitably act as a brake on demand, as buyers consider what they can realistically afford to offer.”
How are house price falls impacting buyers and sellers?
With the markets forecasting a Bank of England base rate rise of over 6%, Kinnaird thinks the likelihood of mortgage rates remaining higher for longer plus the squeeze on household finances will continue to hit house prices, forcing them to fall further over the coming year.
Reports from estate agents suggest there is still interest in buying properties, although it is more likely to come from cash buyers.
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “On the ground, sales are still proceeding often to those who are not dependent on mortgage finance but they are taking longer and often involve protracted renegotiations resulting in modest, rather than large, price falls.”
Meanwhile Nicky Stevenson, managing director at national estate agent group Fine & Country, said buyer interest was on a par with 2019, which she described as a ‘fairly typical’ year for the property market compared to the frenzy that followed.
“Demand continues to outpace supply in many places,” she said. “The homes attracting the most interest and offers are those that look reasonably priced and take account of reduced household buying power.
“Buyers are also looking at properties where there is scope for negotiation, and the prospect of securing a good price on their next home is incentivising them to the market.”
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