House prices fall as the market cools

The UK’s house prices fell slightly in September and the market is showing signs of cooling, Halifax reports.

The latest house price index shows that prices dropped by -0.1% with house buyers worried about rising mortgage interest rates.

However, the annual rate of growth fell +9.9% – down from August’s figure of +11.4%.

Halifax says that a typical UK property now costs £293,835 and house price inflation slowed in all but one region – which was the North East – during the month.

Despite the drop, Wales still shows the strongest annual growth in the UK.

‘Average UK house price experienced a slight fall’

Kim Kinnaird, the director of Halifax Mortgages, said: “The average UK house price experienced a slight fall in September (-0.1%), the second marginal decrease over the past three months.

“The pace of annual growth also slowed for the third month in a row, to +9.9% from +11.4%, returning to single digits for the first time since January.

“The events of the last few weeks have led to greater economic uncertainty, however in reality house prices have been largely flat since June, up by around £250.

“This compares to a rise of more than £10,000 during the previous quarter, suggesting the housing market may have already entered a more sustained period of slower growth.”

She added that predicting what would happen to house prices in future is difficult prices being supported by a strong labour market and a supply shortage.

Mortgage borrowing costs will deliver ‘significant downward pressure’

However, the cost-of-living crisis and the impact in recent weeks of higher mortgage borrowing costs will deliver ‘significant downward pressure’ on house prices in the months ahead.

Avinav Nigam, the cofounder of real estate investment platform, IMMO, said: “The slowdown in house price growth for September was expected as higher interest rates in May and June kicked in, which feed through to transactions data now due to the time lag of conveyancing.

“We are seeing property listings falling by 15 to 20% in some parts of the UK, as uncertainty encourages property owners to delay transaction decisions.”

He added: “The rapid pace of growth we have seen in recent years is coming to an end, partly due to recent interest rate hikes by the Bank of England and the crash of the pound following the government’s mini Budget.

“It’s predicted that house prices could correct by as much as 7 to 10% in coming months.”

‘Lack of supply continued to drive price increases’

Mark Harris, the chief executive of mortgage broker SPF Private Clients, said: “General lack of supply continued to drive price increases in September, while the weak pound stimulated investment in London, although there are signs that the market is now slowing.

“While the turmoil of the past couple of weeks will go down in the history books, the money markets seem to have settled a little.

“More clarity from the government supported by data from the Office for Budget Responsibility will help us get back to a normal functioning market where all lenders can offer a full range of mortgage products.”

‘People will stretch themselves to buy’

Tomer Aboody, the director of property lender MT Finance said: “Where demand outstrips supply and borrowing is cheap, people will stretch themselves to buy.

“That’s what we’ve been seeing over the past couple of years, pushing property prices to new highs.”

He added: “However, rates are rising, with some predicting they will hit 6%.

“While nobody knows for sure whether that will come to pass, rates could stabilise around 4% over the next couple of years, meaning those coming to the end two- or five-year fix could find their mortgage payments double.

“That will be a big hit to absorb in the family finances.”

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