UK house prices are falling for the fourth consecutive month

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UK house prices fell for the fourth consecutive month as rising borrowing costs hit household finances, according to data published on Friday.

Mortgage firm Halifax said average home prices fell 1.5 percent between November and December. This decline is a slowdown from the 2.4 percent decline recorded between October and November.

The annual rate of home price growth slowed to 2 percent in December, down from 4.6 percent in the previous month.

The typical property price fell to £281,272 in December, down from £285,425 in November.

“Uncertainty about how the increased cost of living will affect household bills, along with higher interest rates, is causing an overall slowdown in the market,” said Kim Kinnaird, director of Halifax Mortgages.

Mortgage rates, which reflect expectations of medium-term borrowing costs, have risen in the past few months, following a series of interest rate hikes by the Bank of England in an effort to rein in soaring inflation.

The central bank raised interest rates by half a percentage point to 3.5 percent in December, the highest level in 14 years, warning of a possible tightening of monetary policy.

Market expectations of a rate hike also jumped after then Finance Minister Kwasi Kwarting unveiled his “miniature” budget, containing £45 billion in unfunded tax cuts. But they have since returned to their pre-September 23 levels.

Bank of England data this week showed that in November, mortgage approvals fell to their lowest level in more than two years.

Avinav Nigam, co-founder of real estate investment platform IMMO, said that with rates increasing and banks applying tougher stress tests, “many of those who hoped to buy with mortgage financing will not be able to do so, with a disproportionate impact on young people and poor families.” .

According to Halifax, house prices rose across all UK regions last month, but the rate of growth slowed.

The Northeast recorded the sharpest annual slowdown, with home prices rising 6.5 percent in December, down from 10.5 percent in November.

The downturn in the growth rate was smaller in the East of England and West Midlands, where house prices rose 5.5 per cent and 7.3 per cent respectively, compared to 7.2 per cent and 9.1 per cent in November.

Annual growth in house prices in Wales was 6.1 per cent in December, down from 7.7 per cent in the previous month.

Meanwhile, the annual pace of London house price growth was 2.9 percent in the year to December, 2.1 percentage points lower than the previous month. The average property price in the capital is still well above the national average at £541,239.

“The cost of the average home is still high,” said Kinnaird of Halifax Mortgages, with average home prices now more than they were at the start of 2022.

Halifax expects an 8 per cent drop in house prices in 2023. That would mean a return to levels not seen since April 2021, before the pandemic-fuelled property boom peaked as people rushed to move into larger homes.

“With inflationary pressures now being felt, buyers are less willing or less able to stretch even if they wanted to,” said Gareth Lewis, commercial director at real estate lender MT Finance.

He added that this “will inevitably lead to downward pressure on house prices in the new year.”

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