September data shows the pace of house price declines is easing: Halifax

Data released this morning from Halifax has shown that the 0.4% fall in average UK prices in September is significantly less than August's fall of 1.8%.

On an annual basis, prices are down by -4.7% against this time last year, with the price for a typical home in the UK now sitting at £278,601 - around levels seen in early 2022.

Regional breakdown

All UK nations and the nine English regions registered a decline in house prices on an annual basis. Prices are under the greatest downward pressure in the South East of England, falling by -5.7% over the last year (average house price of £376,450).

Northern Ireland currently has the most resilient house prices, down by just -0.2% compared to this time last year (average house price of £184,108), a fall of less than £400. Scotland also experienced a relatively modest annual decline of -0.8% (average house price of £201,594). Wales saw property prices fall by -3.6% over the last year (average house price of £214,585).

London remains the most expensive place in the UK to purchase a home, with an average property price of £525,678. With prices down by -4.8% over the last year, it has seen the biggest fall of any region in cash terms (-£26,514).

Kim Kinnaird, Director, Halifax Mortgages, said:

“UK house prices fell further in September, edging down by -0.4% on a monthly basis. This was a sixth consecutive monthly fall, though the pace of decline slowed markedly compared to August (-1.8%). The average home now costs £278,601, a drop of around £1,200 since last month.

""On an annual basis, prices are down by -4.7%, largely unchanged from -4.5% in August.

Nonetheless, they remain some £39,400 higher than in March 2020, such was the extraordinary growth seen during the pandemic."

House prices remain resilient despite rate increases

The Bank of England’s decision to hold the Base Rate at 5.25% at the most recent MPC meeting ended a run of 14 consecutive increases. This was the fastest monetary policy tightening cycle in recent history.

House prices have proven more resilient than expected over that period, despite higher mortgage rates suppressing market activity.

While property prices are now around £14,000 below the August 2022 peak, they remain +1.0% above the level seen in December 2021 (£275,889), the month when Base Rate first edged up from 0.1% to 0.25%.

However, as we have highlighted previously, there is often a lag effect between rate increases and the full impact of higher mortgage costs on house prices.

Kim Kinnaird, comments: “Activity levels continue to look subdued compared to recent years, with industry data showing lower levels of new instructions to sell homes and agreed sales. 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.

“However, with Base Rate now likely to be at or around its peak, we are seeing fixed rate mortgage deals ease back from recent highs. Wage growth also remains strong, which has helped with affordability, with the house price-to-income ratio now at its lowest level since June 2020 (6.2 in September vs. 6.3 in August).

“Many economists and financial markets predict that Base Rate will remain higher for longer, with any significant cuts appearing unlikely until inflation gets closer to the Bank of England’s 2% target. Overall, these factors are likely to keep mortgage rates elevated in comparison to recent years, constraining buyer demand and putting downward pressure on house prices into next year.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: "These figures, though historically reliable, look at mortgage approvals rather than completions, while the country’s largest lender doesn’t include cash purchasers either, which make up an increasingly important part of the market.

"Results confirm what we are seeing on the ground – business is bumping along at a new, lower level as buyers and sellers are encouraged partly by expectations of lower interest rates and higher rents making refuge in the lettings market less likely, particularly for those taking their first steps on the ladder."

Anna Clare Harper, CEO of sustainable investment adviser GreenResi, says: "Softer pricing reflects higher interest rates, which have a greater impact on affordability than asking prices. It is also a natural next step after 2022 pricing levels, which were inflated artificially by policies such as the stamp duty holiday and very low-interest rates. This month’s average house price is still above average prices at the start of 2022.

"Many are asking whether house prices will crash. Unlike in commercial property, where values have fallen by 20-30%, it’s unlikely that we will experience a full house price crash.

"Firstly, this is because housing is a necessity, and overall demand for places to live does not change as a result of the strength of the economy. Secondly, 8.8 million (36%) homes in England are owned outright, meaning they will not be affected by higher mortgage interest rates.

"As ever, house-price indices aggregate subtleties in many markets, and in some, for some types of property or in some circumstances, prices will fall more than this, meaning that for investors there are opportunities to buy well."

Alex Lyle, director of Richmond estate agency Antony Roberts, says: "We are finding that the market has yet to shift into top gear following on from the summer lull.

"The volume of new instructions remains low in comparison to the spring but having said that, there appears real value in the market. There are opportunities for buyers who are brave enough not to sit on the fence with an autumn window where competition is more muted and vendors more realistic.

"The hold in base rate has given hope that there’s longer-term stability on the way with regards to mortgages, which should improve the confidence of those anxious about committing to a purchase in the present climate."

Mark Harris, chief executive of mortgage broker SPF Private Clients, says: "While everyone is on the watch for potential headwinds, on the whole lenders are much more confident in their ability to price products. There is much less volatility in the cost of funds than was the case just a few months ago, while there is also a growing feeling that the base rate may have peaked.

"Lenders are comfortable and confident in the housing market as a whole – we have not seen a widescale withdrawal of higher loan-to-value products as might have been the case if there were greater concerns about an impending house price crash. The slowdown in the pace of decline in September seems to back that up.

"With plenty of evidence of lenders enhancing and broadening policy, it’s another positive sign for the market and bodes well for activity in coming months."