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UK house prices fell for a fifth month in a row and fell at the fastest rate since 2009, according to mortgage provider Halifax, as rising mortgage rates hit would-be buyers.
Data on Thursday showed property prices fell 4.6 percent in August from a year earlier when prices hit a record high, the biggest drop since 2009.
Halifax said prices fell 1.9% between July and August, following a streak of monthly declines since April.
The average UK house is currently selling for £279,569, down around £14,000 on last year but around £40,000 above pre-pandemic levels.
Ranald Mitchell, director of Charwin Private Clients, an independent Norwich-based mortgage broker, said: “The impact of higher borrowing costs is now very clear, property sales are harder to come by and sellers are discouraged by lower offers. Temptation to move on.” He expects the rest of the year to “follow this pattern until consumer confidence in mortgage pricing returns.”
The drop was larger than the 0.3 percent monthly drop and 3.45 percent annual contraction forecast by economists polled by Reuters.
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Halifax Mortgage Director Kim Kinnaird said home prices “have proven more resilient than expected” so far this year, even as rising interest rates have weighed on buyer demand.
“However, there is always a lag in rate hikes, and we may now see higher mortgage costs having a greater impact on house prices,” she added.
Imogen Pattison, an economist at Capital Economics, expects mortgage rates to remain around their current level of 5.5% to 6% next year, meaning “demand will remain soft and we thinks this will lead to a further decline in home loans of 5.5 per cent”. price”.
Mortgage rates have fluctuated at record highs in recent months, reflecting changes in medium-term expectations for how much the Bank of England will raise interest rates. Bank of England interest rates have risen from a record low of 0.1% in November 2021 to the current 5.25%. Markets are pricing in another rate hike later this month.
Kinnard believes interest rate volatility could prompt potential buyers to hold off on deals in hopes of gaining some stability and further clarity on the future direction of rates in the coming months.
Halifax said house prices fell in August across all countries and nine of the UK’s regions, with the north generally proving more resilient than the south.
The Southeast was the worst performing region, with prices falling 5% per year. The biggest annual price fall in cash terms was in London, down £22,800.
Wales, which has seen the biggest rise in property prices amid the pandemic-induced space race, fell 4.7% last year.
In contrast, property prices in Scotland fell by just 0.6% last year, the slowest rate of decline in the UK.
Earlier this month, mortgage provider Nationwide reported that UK house prices fell an annualized 5.3% in August, the biggest drop since 2009.
“The August decline in the Halifax and national home price indices is unlikely to be the last,” Pattison said.
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