The Halifax house price index showed that the decline was softer than August when there was a 1.8 per cent fall compared to the previous month.
James Forrester, managing director of Barrows and Forrester, said: “A sixth consecutive monthly fall may seem like cause for concern but what we’re currently seeing is the market readjusting following a sustained boom period that saw house prices driven to record highs.
“This has materialised in the form of a slow but consistent reduction in values rather than the cliff edge drop that many predicted and despite this modest reduction, property values remain substantially higher when compared to the pre-pandemic benchmark.”
On an annual basis, average house prices dropped by 4.7 per cent. The bank said house prices were now similar to the level seen in early 2022.
Property prices are still one per cent higher than they were when the base rate was first increased in December 2021, from a record low of 0.1 per cent to 0.25 per cent.
Halifax said house prices were resilient despite the rising base rate.
However, it said there tended to be a “lag effect” between base rate increases and the impact of higher mortgage costs on house prices.
National and regional changes
Halifax’s house price index recorded a decline across all of the nations and nine English regions.
It said the largest drop in house prices was seen in the South East of England, where there was a 5.7 per cent annually decline to an average house price of £376,450.
In Northern Ireland, average house prices fell by a marginal 0.2 per cent to £184,108. This was only £400 lower than the same period last year and Halifax said prices in the country were the most resilient.
In Scotland, there was a 0.8 per cent fall in average house prices to £201,594, while a 3.6 per cent drop was recorded in Wales where there was an average house price of £214,585.
Price correction is easing
Kim Kinnaird, director of Halifax Mortgages, said: “Activity levels continue to look subdued compared to recent years, with industry data showing lower levels of new instructions to sell homes and agreed sales. Borrowing costs are the primary factor, given the impact of higher interest rates on mortgage affordability.
“Against this backdrop, homeowners inevitably become more realistic about their target selling price, reflecting what has increasingly become a buyer’s market.”
Kinnaird said the base rate was likely to be at or around its peak and fixed rate mortgage pricing was starting to ease. She said wage growth had also helped with affordability.
However, Kinnaird said as the base rate was expected to remain elevated for a while, this was keep mortgage rates relatively high which would constrain buyer demand and put downward pressure on house prices.
Jonathan Hopper, CEO of Garrington Property Finders, said: “Britain’s property price correction is far from over, but there are signs it is easing.
“The Halifax’s data marks the second time this week that a house price index has reported that monthly price falls are slowing.”
He added: “The big question now is how the easing of mortgage rate escalation might feed through into both prices and the number of sales. While no one is expecting mortgages to get significantly cheaper any time soon, fixed rate deals have come down from their recent highs and there’s a growing hope that the peak is past.”
Alan Davison, personal finance distribution director at Together, said: “House prices may have dipped further, but in truth this won’t completely undo the increases seen over the last four years. And while recent news of falling inflation may also spark hope for first-time buyers and borrowers hunting for cheaper rates; we’re not out of the woods just yet.”
