House prices see biggest fall since 2023: Lloyds

House prices fell by 0.6% in October, following a 0.1% decrease in September, the latest Lloyds house price index shows.

On an annual basis house prices are 1.2% lower, the biggest fall since October 2023.

Northern Ireland continues to lead the UK, with annual house price growth at 4.4%, although the rate has slowed considerably from 6.9% last month. 

Scotland also continues to post solid growth, with prices up 2.8% over the past year. Growth has also strengthened slightly in Wales, rising to 1.6%.

In England, three regions recorded annual growth with the North West recording an increase of 2.2% and the North East seeing prices rise 2.0%.

The West Midlands was the only other English region to see positive annual growth, at 0.3%.

House prices remain under pressure across much of southern England, with Greater London recording the largest annual decline, down 3.1% year-on-year, closely followed by the South East and South West, both down 2.4%.

Andrew Asaam, mortgages director at Lloyds, said: “UK house prices fell by 0.6% in October, a larger drop than in recent months, taking the average property price down to £296,285. Prices were also 1.2% lower than a year ago, the biggest annual fall since October 2023.

“Housing demand is currently being tested by a challenging economic backdrop. Renewed inflationary pressures, driven in part by the conflict in the Middle East, are keeping borrowing costs high and adding to the squeeze on household finances, making some buyers understandably more cautious.

“However, it’s important to put October’s fall in context. House prices have changed relatively little over the past couple of years, as the market has gradually adjusted to higher interest rates. The recent rise in energy and other household costs has added to the pressure on buyers, so some adjustment in prices is not surprising.

“Looking ahead, conditions are likely to remain subdued in the near term, but we don’t expect this to lead to a sustained period of falling house prices. With wages continuing to rise faster than property prices, the gap between earnings and house prices should gradually narrow, helping affordability to improve over time.”

David Hollingworth, associate director at L&C Mortgages, commented: “The drop in prices will do nothing to cheer homeowners and subdued house price inflation figures look likely to be a regular fixture in coming months. Mortgage rates have risen substantially since the outbreak of the Iran war, as fixed rates have reflected the market view that interest rates would need to rise. 

“The base rate rise yesterday is the first of those rate hikes, as the Bank of England looks to head off the impact of higher inflation in the broader economy as a result of the energy shock. 

“Higher interest rates are likely to affect confidence and see those that don’t need to move to take a ‘wait and see’ approach, especially as the festive season is fast approaching. 

“On a more positive note the desire of first time buyers to own their own home remains. With less competition from other buyers, they will have time to consider their options and potentially negotiate a little harder. While affordability remains stretched, a period of slower house price inflation should allow any rise in wages to help ease some of that pressure over time.”

Amy Reynolds, head of sales at estate agency Antony Roberts, added: “The market has lost some momentum as we head towards the end of the year. Buyers are still out there, but they're being careful.  

“Borrowing costs are the main brake. Yesterday’s base rate rise has been largely priced in already, with fixed rates heading towards 6% for weeks. The real damage is psychological. Another rise tells people that borrowing is getting more expensive, not cheaper, and that makes them hesitate. The people hit hardest are those remortgaging and second-steppers trying to stretch to one more bedroom.  

“We expect a quiet December and a slow start to 2027.  The sellers who still get deals done will be those who price realistically from day one."