UK house prices fall at fastest rate in nearly two years

UK house prices suffered their biggest monthly drop in almost two years in October, with the drop largely caused by the mini-budget and the “significant shock” it caused to the property market.

House prices fell 0.4 percent last month, according to Halifax, the leading lender, which said it was the steepest drop since February 2021.

According to the Halifax metric, it is the third time in four months that house prices have fallen and takes the median price of a UK home to £292,598, the lowest since May this year.

Compared to last October, home prices are 8.3 percent higher, marking the weakest annual rate of inflation since late last year. Aside from North East England, annual price growth slowed across all regions last month.

“While a post-pandemic slowdown was expected, there is no question that the housing market took a significant hit as a result of the mini-budget that saw a sudden acceleration in mortgage rate increases,” said Kim Kinnaird, director of mortgages. from Halifax.

The Halifax data is the latest confirmation that, after two years of rapid growth, the property market is beginning to cool.

Nationwide, which uses a slightly different method to calculate its home price index, said last week that home prices fell for the first time in 15 months in October.

Estate agents saw deals fall through and potential buyers withdrew their interest in the days following Kwasi Kwarteng’s mini-budget. His plans spooked bond markets and sparked a sharp rise in interest rate expectations. Amid the chaos, lenders raised their mortgage rates or pulled products altogether.

The housing market had started to slow even before the then chancellor took over the clearance box, and the market was unable to maintain the record growth it had enjoyed over the previous two years, especially with households suffering from the worst cost of living crisis. for decades.

Since just before the pandemic, home prices have risen more than 25 percent, Halifax estimates. Even with the recent drop, prices remain one step away from being the most expensive in their history.

Kinnaird believes that house prices are “likely” to hit new long-term records, particularly given the well-documented shortage of homes for sale.

In the short term, however, prices will be determined by the health of the labor market, as well as the depth and duration of the looming recession.

“The rising cost of living, coupled with already stretched mortgage affordability, is expected to continue to weigh on activity levels,” he said. “With tax increases and spending cuts expected in the fall statement, economic headwinds point to a much slower period for home prices.”

The consensus among realtors is that home prices will fall about 10 percent over the next year as higher mortgage costs limit what people can afford.

“It’s a fair assumption that house prices have peaked after more than 20 percent growth during the pandemic,” said Tom Bill, head of residential research at Knight Frank. “After 13 years of ultra-low borrowing costs, anyone who buys a home or remortgages will recognize that the ground has changed, which is why we expect prices to fall back to where they were in the summer of 2021.”

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