That is according to Nationwide, which revealed house prices have fallen by 5.3% over the last year to September – the same as August.
With the average property costing £257,808 this is the equivalent to a drop of £14,500.
It comes as the number of mortgages approved for house purchases plunged in August, to around 30% below the monthly average in 2019 – before the pandemic struck.
Robert Gardner, chief economist at Nationwide, said: “This relatively subdued picture is not surprising given the more challenging picture for housing affordability.
“For example, someone earning an average income and purchasing the typical first-time buyer home with a 20% deposit would spend 38% of their take home pay on their monthly mortgage payment – well above the long-run average of 29%.”
But the outlook was not entirely gloomy according to Gardner. He said factors such as falling inflation and fixed-rate mortgage prices getting lower mean there may be less pressure on remortgagers and home buyers in the future.
“With Bank Rate not expected to decline significantly in the years ahead, borrowing costs are unlikely to return to the historic lows seen in the aftermath of the pandemic.
“Instead, it appears more likely that a combination of solid income growth together with modestly lower house prices and mortgage rates will gradually improve affordability over time, with housing market activity remaining fairly subdued in the interim” he added.
How are interest rates impacting the housing market?
When the Bank of England paused its internet rate cycle earlier this month and held the Base Rate at 5.25%, it came as a huge relief to borrowers.
Nicky Stevenson, managing director of estate agent Fine & Country, said it would also have an influence on the housing market.
“Although prices may still experience some ups and downs in the coming months,” she said, “last week’s base rate decision strengthens forecasts that the property market will experience a soft landing.
“The suggestion that we have nearly reached a peak in interest rates will provide buyers with a lot of confidence, especially since mortgage lenders are already slashing their rates in response.
“This should help the property market experience an extra bump in activity this autumn, alongside the traditional seasonal spike in demand, with many sellers already deciding this is a good time to put their home on the market.”
Meanwhile, Karen Noye, mortgage expert at Quilter, said homeowners and would-be borrowers should tread carefully.
“There might be a glimmer of hope on the horizon now that we should have reached or neared the peak of interest rate rises,” she said.
“This means that people who have seen significant wage growth over the last year can now better plan their finances for a property purchase amidst this new more stable interest rate environment.
“That said, we are not likely to see a great decline in mortgage rates any time soon and as such many will remain priced out the market despite higher wages. Mortgage rates though will start to slowly edge downward as lenders compete for custom in a tight market.”
