Halifax’s House Price Index reveals that average house prices fell by 1% in March on a monthly basis, which compares to a rise of 0.3% in February.
The average UK house price stands at £288,430, which is £2,900 down on last month.
Northern Ireland was the strongest performing nation or region in the UK, going up by 4.3% on a yearly basis. The average house price costs £194,743, a rise of £7,972 compared to last year.
Wales’ annual house price growth came to 1.9% in March, up from 3.9% in February. The average home costs £219,214.
Scottish house prices increased by 2.1% year-on-year (YOY) to £204,835.
In England, the North West had the strongest growth at 3.7% to £232,315, whereas Eastern England reported the largest decline of minus 0.9%, with homes selling for £330,627.
London has the highest average house price in the UK at £539,917. Prices have gone up by 0.4% in the last year.
Monthly house price fall not unexpected
Kim Kinnaird, director of Halifax Mortgages, said that a monthly fall occurring after five consecutive months of growth was “not entirely unexpected”, especially “in view of the reset the market has been going through since interest rates began to rise sharply in 2022”.
“Despite this, house prices have shown surprising resilience in the face of significantly higher borrowing costs. Affordability constraints continue to be a challenge for prospective buyers, while existing homeowners on cheaper fixed term deals are yet to feel the full effect of higher interest rates.
“This means the housing market is still to fully adjust, with sellers likely to be pricing their properties accordingly,” she added.
Kinnaird said that financial markets have become “less optimistic about the degree and timing of base rate cuts, as core inflation proves stickier than generally expected.
“This has stalled the decline in mortgage rates that had helped to drive market activity around the turn of the year,” she noted.
Kinnaird continued: “The broader picture is that house prices are up year-on-year, reflecting the opposing forces of an easing cost-of-living squeeze – now that pay growth is outpacing general inflation – and relatively high interest rates. Taking a slightly longer-term view, prices haven’t changed much over the past couple of years, moving in a narrow range since the spring of 2022, and are still almost £50,000 above pre-pandemic levels.
“Looking ahead, that trend is likely to continue. Underlying demand is positive, as greater numbers of people buy homes, demonstrated by recent rises in mortgage approvals across the industry and underpinned by a strong labour market. And with rental costs rising at record rates, homeownership continues to be an attractive option for those who can make the sums work.
“However, the housing market remains sensitive to the scale and pace of interest rate changes, and with only a modest improvement in affordability on the horizon, this will likely limit the scope for significant house price increases this year.”
UK housing market going through ‘phase of cautious recovery’
Nathan Emerson, CEO at Propertymark, said that spring “tends to be one of the busiest times of the year for the housing market, and with inflation falling and interest rates remaining static, homebuyers have adjusted to the latest market conditions”.
He continued: “This should result in a surge of new buyers, sellers, and properties coming to the market as the year progresses. This was reflected in Propertymark’s latest Housing Insight Report, which found that there has been an 18% increase in the number of new properties coming to the market.
“However, if inflation continues to drop to pre-pandemic levels, Propertymark is hopeful that interest rates will also start to fall, and the whirlwind of economic turbulence will finally settle for everyone once again.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, added: “Business is brisk, as optimism over the direction of mortgage rates prevails and buyers and sellers demonstrate more willingness to transact.
“While the flurry of mortgage rate reductions at the start of the year has slowed, pricing is still considerably cheaper than it was a year ago. Assuming inflation continues to fall towards its 2% target, the first interest rate reduction could come as early as the summer, which will further boost confidence and activity.”
Karen Noye, mortgage expert at Quilter, agreed that the UK housing market is “currently navigating through a phase of cautious recovery, a period characterised by moderated growth and as shown this morning the occasional drop in prices”.
She continued: “The early surge in price increases seen at the start of the year is now showing signs that it was not as robust as once hoped, indicative of a market adjusting to significant economic pressures. However, a spring surge as a result of a revived buyer confidence may help house prices to increase at pace again.
“The dynamics of the mortgage market have played a pivotal role in shaping the current state of the property market. Initial cuts in mortgage rates sparked a renewed interest among potential buyers and movers, who had previously adopted a wait-and-see approach due to the financial uncertainties of 2023. However, the subsequent slowdown in rate reductions by lenders has served to keep property price rises in check.”
Noye said that, looking ahead, there was “anticipation” around the Bank of England Monetary Policy Committee’s (MPC’s) decisions around base rate.
She added: “With expectations leaning towards a reduction in interest rates in the not-too-distant future, there’s a sense of optimism about the market’s direction. However, this should be tempered by the fact that the market is incredibly sensitive to broader economic indicators and one hiccup can cause a significant downward reaction.
“The interplay between mortgage rates, economic policies, and buyer sentiment is shaping a landscape where stability is the desire right now, and if we can get some semblance of that, house prices are likely to start to increase again in line with demand.”
