House prices fall for second time in three months

In the 12 months to September house prices rose 9.9%, the slowest increase since January.

UK house prices decreased 0.1% in the month of September, according to Halifax, Britain’s largest mortgage lender. The drop means that the average house price has fallen in two of the past three consecutive months.

“The cost of a typical home edged down a little to £293,835 from the previous month’s record high,” said Kim Kinnaird, Director at Halifax Mortgages.

Meanwhile, in the 12 months to September, house prices recorded a growth of 9.9%. In comparison, in the year to August, house prices increased 11.4%.

Kinnaird explained that annual growth has slowed for the third month in a row, returning to a single digit rise for the first time since January.

“After an extended period of home values shattering one record after another, property prices are cooling - even retreating,” said Myron Jobson, Senior Personal Finance Analyst at interactive investor.

However, while prices have fallen, he explained that the mortgage market remains “precarious for buyers” due to the volatility which followed the Chancellor’s Mini-Budget.

“Mortgage rates have been on the up in line with increases to the Bank of England’s base rate, but rates have typically spiked by between one and two percentage points two weeks on from the Mini-Budget,” he said.

“The difference amounts to hundreds in pounds and pence terms, and it means that buyers can’t afford as much house as they could 14 days ago.” 

While Kinnaird noted that the past few weeks have seen economic uncertainty, house prices have been largely flat since June. Since this month, the average price has only risen by £250.

“Predicting what happens next means making sense of the many variables now at play, and the housing market has consistently defied expectations in recent times,” Kinnaird said.

She then suggested that Stamp Duty cuts announced in the Mini-Budget, the short supply of homes, the prospect of higher interest rates and the impact of higher mortgage borrowing costs in recent weeks could all lead to further downward pressure on house prices.

Kinnaird and Jobson’s claims of rising rates are corroborated by Moneyfacts data. Today the average two year fixed rate stands at 6.16%, its highest since November 2008, during the onset of the financial crisis.

In comparison, the average two year fixed rate was 4.24% at the beginning of September.

The average five year fixed mortgage, meanwhile, sits at 6.07% today. The last time this average figure breached 6% was in January 2010.

Since the beginning of September, the average rate has risen by 1.74 percentage points.

In October 2021 the average two and five year rate was recorded at 2.25% and 2.55% respectively.