According to Halifax’s latest house price index, the average house costs £293,835, which is marginally down from August’s record high of £293,992.
The report added that monthly prices contracts by 0.1 per cent, which is the second decrease over the past three months.
Regional outlook
From a regional perspective, 11 out of 12 areas reported slower growth than August, the exception being North East.
The report noted that there were nine UK nations and regions where annual house price growth fell to single digits. These included Eastern England, Greater London, the North East and Scotland.
Wales reported that strongest annual house price growth at 14.8 per cent with the average property price coming to £224,490.
West Midlands has the strongest rate of growth in England at 13.3 per cent, with average property costing £255,822.
Annual house price growth in Northern Ireland was pegged at 10.9 per cent and Scotland came to 8.5 per cent. Average prices came to £184,570 and £204,305 respectively.
London has the lowest annual house price growth at 8.1 per cent but the average house price was £553,849.
House prices ‘largely flat’ since June
Kim Kinnaird, director of Halifax Mortgages, said that the events of the past few weeks have led to “greater economic uncertainty” but, in reality, house prices have been “largely flat” since June, rising by around £250.
This compares to an increase of £10,000 in the prior quarter, which Kinnaird suggested the housing market had “already entered a more sustained period of slower growth”.
She added: “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.
“While stamp duty cuts, the short supply of homes for sale and a strong labour market all support house prices; the prospect of interest rates continuing to rise sharply amid the cost of living squeeze, plus the impact in recent weeks of higher mortgage borrowing costs on affordability, are likely to exert more significant downward pressure on house prices in the months ahead.”
Kinnaird continued: “This will undoubtedly be a cause of some concern for homeowners, but the unprecedented rate of property price inflation we’ve seen in recent years has been far above the historic average.
“It’s important to look at slower growth in this context – since the start of the pandemic average property values have risen by around plus 23 per cent, almost £55,000, with detached house prices up by more than £100,000 over the same period.”
House price analysis: Buyers ‘pausing for breath’
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said that new buyers were “pausing for breath” while they consider the likely pace and size of future interest rate hikes, leading to a fall-off in activity.
He added: “The question is whether worries about rising mortgage payments outweigh the benefits of the recent stamp duty reduction, particularly for first-time buyers.
“The mini Budget sparked a chain reaction of unintended consequences raising buyer concerns that any savings in stamp duty and other taxes would be more than offset by mortgage rates rising much more quickly and higher than expected.”
Emma Cox, MD of real estate at Shawbrook, added that high inflation and rising interest rates had led to a surge in interest rates creating a “challenging backdrop for prospective house buyers”.
She continued that the introduction of stamp duty reform offered a “glimmer of hope” for people in the process of buying a property but many would be “waiting to see which way the wind turns before committing to buy.”
Cox added: “Against an uncertain political and economic backdrop, house prices are likely to continue to be affected, at least in the short term. More needs to be done to alleviate cost of living concerns and restore consumer confidence, on top of solving long-term supply issues.
“With many still reliant on the private rental sector, it’s vital that landlords are supported and encouraged to provide quality, safe and sustainable properties.”
Property listings falling by 15 to 20 per cent
Avinav Nigam, cofounder of real estate investment platform Immo, said that the slowdown in house price growth was expected as higher interest rates in May and June kicked in.
He added that it was seeing property listings falling by 15 to 20 per cent as uncertainty has encouraged owners to delay transaction decisions.
Nigam continued: “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 seven to 10 per cent in coming months. However, we don’t expect a house price growth reversal to improve the affordability of housing much due to fast rising interest rates. Mortgage lenders are starting to require consumers prove they can afford seven per cent interest rates, as an indication of where rates could go.”
He said that as it becomes “harder and more expensive to buy”, consumer demand could shift more towards renting, but rental stock was also falling.
Mortgage payments could double
Tomer Aboody, director of property lender MT Finance, said that mortgage rates were rising, coming to more than six per cent.
He added that rates could stabilise around four per cent over the next couple of years, so those coming to the end of two or five-year fixed rates could find their mortgage payments double.
“That will be a big hit to absorb in the family finances,” he added.
Aboody continued: “There are hard times ahead and many people may have to downsize because they can’t afford the home they bought when interest rates were at rock-bottom. Stamp duty reductions targeted at those who need to sell and find something smaller would make a lot of sense.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, said that the turmoil of the past couple of weeks would “go down in the history books” but the money markets were beginning to settle.
He continued: “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.
“It is important to reiterate that the mortgage market is still open for business. Pricing is more expensive than it was but there are plenty of innovative products available that can help first-time buyers boost their deposit and/or affordability, making that dream of buying their first property more within reach than they may think.”
“Speaking to an independent mortgage broker will help buyers navigate the options available, finding a mortgage suitable for their requirements.,” he concluded.
