House prices cooling amid high interest rates

Average house prices fell by -0.1% in June, Halifax’s third consecutive monthly fall.

Its latest House Price Index reveals house prices fell to £285,932 in June, down by around £7,500, compared with the same month last year, recording the largest year-on-year decrease since June 2011.

The high street lender also reveals average house prices are now falling on an annual basis in most parts of the UK.

Rate of decline largely reflects the impact of historically high house prices last summer

Kim Kinnaird, director of Halifax Mortgages, said: “With very little movement in house prices over recent months, this rate of decline largely reflects the impact of historically high house prices last summer – annual growth peaked at 12.5% in June 2022 – supported by the temporary Stamp Duty cut.”

“To some extent, the annual growth figure also masks the fluctuations we’ve seen in the market over the past 12 months.

She added: “Average house prices are actually up by +1.5% (£4,000) so far this year, with most of that growth coming in the first quarter, following the sharp fall in prices we saw at the end of last year in the aftermath of the mini-budget.”

A degree of stability in the face of economic uncertainity

The South of England remains the area where house prices are facing the most downward pressure. At -3.0%, the annual fall in the South East was the largest since July 2011 (average house price now £384,106).

London recorded an annual decline of -2.6% (average property price of £533,057), its weakest performance since October 2009 and a drop of around £15,000 over the last year.

Ms Kinnaird says the latest House Price Index figures suggest a degree of steadiness despite the gloom of economic forecasts.

“These latest figures do suggest a degree of stability in the face of economic uncertainty, and the volume of mortgage applications held up well throughout June, particularly from first-time buyers.

“That said the housing market remains sensitive to volatility in borrowing costs. Concerns about persistent inflation have led to a significant increase in the cost of funding. Coupled with base rate rising by another 50bp, this contributed to a big jump in typical mortgage rates over the last month.”

People’s finances are going to be impacted by rising interest rates

Nathan Emerson, CEO of Propertymark says: “It is inevitable that people’s finances are going to be impacted by rising interest rates, and there is a higher chance of a fall through in a sale due to the changes in buyers’ finances.

“However, serious buyers and sellers are rightly putting their confidence in the market and the majority are successfully and affordably moving home.

“Negotiations being made on properties are allowing wiggle room and bringing down the overall cost from the pandemic house price boom which was desperately needed as they were previously unrealistic and unsustainable.”

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