According to the latest figures from Halifax, the typical homeowner has lost £14,000 in the value of his property in the last year.
Halifax’s long-running index showed house prices falling 4.6 percent annually, the sharpest year-on-year decline since 2009, as mortgage growth takes its toll on the housing market.
According to the mortgage lender, average house prices fell 1.9 percent in August alone – the sharpest monthly decline since November 2022.
According to Halifax, the average house now costs £279,569, although that’s only back to where it was in early 2022.
Falling: House prices fell 4.6 percent on an annual basis, compared with 2.5 percent in July, despite prices hitting a record high last summer
Halifax’s figures come in line with Nationwide’s home price index, which last week suggested prices had fallen 5.2 percent year-on-year.
Kim Kinnaird, director of mortgages at Halifax, believes that while house prices have proven more resilient than some might have expected, it’s likely that prices will continue to fall for the remainder of the year.
He said: “It’s fair to say that house prices have proved more resilient than expected so far this year, although higher interest rates weighed on buyer demand.”
“However, there is always a lag effect with rate hikes, and we may now be seeing higher mortgage costs having a greater impact on house prices.”
“Elevated month-to-month volatility is also to be expected when activity levels are lower, although overall the pace of decline is in line with our full-year guidance.”
The average home is now £279,569, down around £5,000 since July and back to where it was at the beginning of 2022
Unsurprisingly, higher mortgage rates are seen as a key driver of development.
According to Moneyfacts, the average fixed rate on two-year mortgages is now 6.67 percent, up from 2.38 percent two years ago.
That means the average person taking out a £200,000 mortgage and paying it back over 30 years is paying £1,372 a month, compared to £885.
Even those who can secure the cheapest mortgages will suffer a financial shock. The cheapest two-year fix currently costs 5.75 percent. Two years ago, they managed to get a deal at just under 1 percent.
Left the summit behind? Fixed-rate mortgage rates appear to be falling somewhat, but are still well above levels borrowers were at prior to last year
However, despite the dramatic shift in mortgage rates, average prices remain around £40,000 above pre-pandemic levels.
Jeremy Leaf, a north London estate agent and former chief executive of Rics Residential, believes the fall in house prices is being cushioned somewhat by the low number of transactions.
According to Zoopla, the number of home sales completed this year is expected to fall by a fifth compared to 2022, the lowest since 2012.
“Prices continue to fall, although supported to some extent by lack of inventory and fewer but more serious buyers,” Leaf says.
“With so many rate hikes, affordability is an issue, especially for those on tighter budgets who often buy smaller properties, so the market remains price-sensitive.”
“The penny has dropped for the majority of sellers, who are realizing they may not achieve what they initially expected.
On track for 1 million sales: According to Zoopla, sales will be down 21 percent compared to 2023, the lowest level since 2012
He adds: “Because many sellers are also buyers, they realize that while they may have to accept less than they originally wanted for their property, they will also pay less for their next home, which is significant as many will make a purchase from them.”
“Sellers who don’t see prices going down stay in the market and may end up having to accept a lower price in order to trade.”
Halifax expects house prices to continue falling until the market finds an equilibrium where buyers are comfortable with mortgage costs.
Kinnaird added: “Consistent with previous forecasts, we expect further downward pressure on property prices through the end of this year and into next.”
“While a drop won’t be welcomed by current homeowners, it’s important to remember that prices are still 17 percent above pre-pandemic levels.”
However, some real estate agents assume that buyer demand will pick up again in the coming months.
Nicky Stevenson, chief executive of national property brokerage group Fine & Country, says: “While demand has slowed over the summer, this is in line with normal seasonal patterns and is expected to pick up again as we get into autumn.”
“Mortgage lenders are again competing for business and lowering their mortgage rates accordingly, which will ease the pressure on homebuyers and further fuel demand in the coming months.”
“If there is indeed a pause in interest rate hikes this year, it should further boost buyer confidence.”
At a regional level, southern England and Wales are experiencing the strongest downward pressure on house prices, while Scotland is proving more resilient
As shoppers face the need to find larger deposits and fund higher monthly repayments, the Southeast is experiencing the biggest drop. House prices are down 5 percent year-on-year.
Wales, which has seen some of the biggest gains in house prices during the pandemic-driven race for space, saw house prices fall by -4.7 percent last year.
London remains the most expensive place in the UK, although the typical homeowner there has lost £22,777 in value over the past year
In Northern Ireland, house prices have fallen by -1.5% annually, while in Scotland, house prices have fallen by just -0.6% over the last year.
With an average house price of £529,814, London remains the most expensive place in the UK to buy a house.
However, with prices down -4.1 per cent over the last year, it also represents the biggest drop of any region in cash terms as the average Londoner suffered a £22,777 loss in the value of their home.
Matt Thompson, Sales Director at London-based real estate agency Chestertons, says: “As households are impacted by higher interest rates, homebuyers are becoming more strategic and flexible in their property searches, adjusting their budget or broadening their search criteria to find a suitable home. “
“While some buyers took a break during the August holidays, others used the last month to enter into price negotiations or seal the deal by signing contracts.”
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