UK house prices fell at the fastest annual rate in 14 years in September, as high mortgage costs fuelled a sixth consecutive monthly drop in a “buyer’s market”, according to Halifax.
Halifax, Britain’s biggest mortgage lender, said prices fell by 4.7% in September, the biggest year-on-year decrease since 2009.
The average price of a typical UK home fell to £278,601, down from £292,197 in the same month last year. Halifax said higher mortgage costs were likely to weigh on prices into next year.
House prices fell 0.4% month on month in September, the sixth fall in a row, albeit smaller than the 1.8% drop in prices in August.
“Activity levels continue to look subdued compared with recent years,” said Kim Kinnaird, the director of Halifax Mortgages. “Borrowing costs are the primary factor, given the impact of higher interest rates on mortgage affordability. Against this backdrop homeowners inevitably become more realistic about their target selling price, reflecting what has increasingly become a buyer’s market.”
Figures published last month showed that UK mortgage approvals fell in August to their lowest level in six months as high interest rates cooled the housing market.
The Bank of England said net mortgage approvals for house purchases fell from 49,500 in July to 45,400 in August and were down by a third from the same month last year.
Last month, the Bank of England kept interest rates on hold for the first time in almost two years, ending a run of 14 consecutive increases and raising the prospect that a peak in borrowing costs had been reached as lenders finally began to cut rates on mortgage deals.
“With the base rate now likely to be at or around its peak, we are seeing fixed rate mortgage deals ease back from recent highs,” Kinnaird said.
However, she added that the base rate was likely to remain high for an extended period, until inflation got back to the target of 2%, meaning mortgage rates were likely to remain high for some time.
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“Overall, these factors are likely to keep mortgage rates elevated in comparison with recent years,” she said. “Constraining buyer demand and putting downward pressure on house prices into next year.”
A separate survey by the Office for National Statistics found that 40% of people currently paying rent or a mortgage are finding it difficult to afford these payments, up from 30% at the same time last year.
Despite the fall in house prices in September, Halifax said the average home was still worth almost £40,000 more than in March 2020, when the UK went into lockdown.