The typical homeowner has seen £14,000 knocked off the value of their property over the last year, according to Halifax’s latest figures.
Halifax’s long running index showed house prices dropped by 4.6 per cent annually, the biggest year-on-year fall since 2009, as the mortgage spike takes its toll on the property market.
Average house prices fell by 1.9 per cent in just the month of August, according to the mortgage lender – the largest monthly fall since November 2022.
The average home now costs £279,569, according to Halifax, although this is only back to the level seen at the start of 2022.
Falling: Property prices dropped by 4.6 per cent on an annual basis, down from 2.5 per cent in July, though prices were at a record peak last summer
Halifax’s figures chime with Nationwide’s house price index, which last week suggested prices had fallen by 5.2 per cent year-on-year.
Kim Kinnaird, director of mortgages at Halifax, believes although house prices have proved more robust than some might have expected, it is likely prices will slide further for the remainder of the year.
He said: ‘It’s fair to say that house prices have proven more resilient than expected so far this year, despite higher interest rates weighing on buyer demand.
‘However, there is always a lag-effect where rate increases are concerned, and we may now be seeing a greater impact from higher mortgage costs flowing through to house prices.
‘Increased volatility month-to-month is also to be expected when activity levels are lower, though overall the pace of decline remains in line with our outlook for the year as a whole.’
The average home now costs £279,569, down by around £5,000 since July, and back to the level seen at the start of 2022
Unsurprisingly, higher mortgage rates are seen as the major contributor to what is unfolding.
The average two-year fixed rate mortgage mortgage rate is now 6.67 per cent, according to Moneyfacts, up from 2.38 per cent two years ago.
This means that the average person securing a £200,000 mortgage and repaying over a 30 year term will be paying £1,372 a month compared to £885.
Even those able to secure the cheapest mortgages will face a financial shock. The cheapest two-year fix charges 5.75 per cent at present. Two years ago, it was possible to secure a deal at close to 1 per cent.
Past the peak? Fixed mortgage rates appear to be falling back somewhat – but remain well above levels enjoyed by borrowers before last year
However, despite the dramatic shift in mortgage rates, average prices remain roughly £40,000 above pre-pandemic levels.
Jeremy Leaf, a north London estate agent and a former Rics residential chairman believes that house price falls are being cushioned somewhat by the low level of transactions taking place.
The number of property sales completing this year is on track to be down a fifth on 2022, according to Zoopla, marking the lowest number since 2012.
‘Prices continue to soften although they are supported to a degree by the shortage of stock and fewer but more serious buyers,’ says Leaf.
‘With so many rate rises, affordability is a concern, especially for those on tighter budgets, often buying smaller properties so the market remains price sensitive.
‘The penny has dropped for the majority of sellers who are recognising that they may not achieve what they originally anticipated.
On track for 1m sales completions: Sales completions set to be 21 per cent lower over 2023, the lowest level since 2012, according to Zoopla
He adds: ‘As many sellers are also buyers, they realise that although they may have to accept less than they initially wanted for their property, they will also pay less for their next home which is significant as many will be trading up.
‘Those sellers who refuse to recognise that prices are softening will remain on the market and may end up having to accept a lower price in order to make their move.’
Halifax expects house prices to continue on a downward trend until the market finds an equilibrium where buyers are comfortable with mortgage costs.
Kinnaird adds: ‘We do expect further downward pressure on property prices through to the end of this year and into next, in line with previous forecasts.
‘While any drop won’t be welcomed by current homeowners, it’s important to remember that prices remain 17 per cent above pre-pandemic levels.’
However, some estate agents are predicting that buyer demand will bounce back over the coming months.
Nicky Stevenson, managing director at national estate agent group Fine & Country says: ‘While demand has slowed over the summer, this matches normal seasonal patterns and is expected to build again as we head into autumn.
‘Mortgage lenders are competing for business again and bringing down their mortgage rates accordingly, which will ease pressure on home-buyers and will further prop up demand over the coming months.
‘If a pause in base rate rises does materialise this year, this should further boost buyer confidence.’
On a regional level, Southern England and Wales are seeing most downward pressure on property prices, while Scotland is showing greater resilience
Buyers faced with the need to find larger deposits and fund bigger monthly repayments means the South East is experiencing the biggest drop. House prices have fallen by 5 per cent year-on-year.
Wales, which recorded some of the biggest gains in property prices during the pandemic-driven race for space, has seen property prices fall by -4.7 per cent over the last year.
London remains the most expensive place in the UK despite the typical homeowner there seeing £22,777 wiped off the value of their property over the past year
In Northern Ireland property prices have fallen by -1.5 per cent annually, while in Scotland property prices fell by just -0.6 per cent over the last year.
London remains the most expensive place in the UK to purchase a home, with an average property price of £529,814.
However with prices down by -4.1 per cent over the last year, it also represents the biggest fall of any region in cash terms, with the average Londoner seeing £22,777 wiped off their home’s value.
Matt Thompson, head of sales at London based estate agency Chestertons, says: ‘With higher interest rates impacting on households, property buyers are adopting a more strategic and flexible property search by adjusting their budget or widening their search criteria to find a suitable home.
‘Although some buyers took a break during the August holidays, others utilised last month to enter price negotiations or seal the deal by signing contracts.’
