UK house prices fall at fastest rate in 12 years

UK house prices fell in June at the fastest annual pace since 2011 as the rise in mortgage rates hit the property market, mortgage provider Halifax said.

The High Street lender said the annual fall of 2.6% was equal to around £7,500 being wiped off the average UK house price, the biggest drop since 2011. Prices for June fell for the third month in a row, dipping 0.1%, it said, indicative of a cooling market. The typical UK property now costs £285,932.

“The average UK house price fell slightly in June, down by around £300 compared to May (-0.1%) with a typical property now costing £285,932. This was the third consecutive monthly fall, albeit it a modest one. The annual drop of -2.6% (-£7,500) is the largest year-on-year decrease since June 2011. With very little movement in house prices over recent months, this rate of decline largely reflects the impact of historically high house prices last summer – annual growth peaked at +12.5% in June 2022 – supported by the temporary Stamp Duty cut,” Kim Kinnaird, Director, Halifax Mortgages, said.

The annual growth figure partially obscures the market's fluctuations in the past year, Kinnaird explained. Average house prices have actually increased by +1.5% (£4,000) so far this year, primarily in Q1 after a significant price drop in the aftermath of the mini-budget. These recent figures indicate a level of stability amid economic uncertainty, and mortgage applications, especially from first-time buyers, remained robust throughout June.

Average price of property drops by 2.6% year on year in June as mortgage rates rise.

A year ago, house prices were on the rise due to high demand and limited housing supply. However, the current situation shows a comparably sluggish market. Recent data from HM Revenue and Customs indicates a 25% decrease in transactions in May compared to the same month last year, with 74,360 recorded transactions.

“The housing market remains sensitive to volatility in borrowing costs. Concerns about persistent inflation have led to a significant increase in the cost of funding. Coupled with base rate rising by another 50bp, this contributed to a big jump in typical mortgage rates over the last month,” Kinnaird noted. “The resulting squeeze on affordability will inevitably act as a brake on demand, as buyers consider what they can realistically afford to offer. While there’s always a lag effect when rates go up, many existing mortgage holders with variable deals or rolling off fixed rates will likely face an increase in the next year.”

The Nationwide building society reported a significant decline in UK house prices, marking the fastest annual pace of decrease in nearly 14 years. Prices dropped by 3.4% in the year leading up to May, representing the largest decline since July 2009. As interest rates began to rise, many mortgage-holders acted swiftly, resulting in fewer individuals remaining on standard variable rates. This situation has impacted the financial standing of certain lenders. OneSavings Bank, for instance, announced a £180 million impact, leading to a 20% decline in its shares on Friday.

Overall, the housing market in the UK is facing economic uncertainty and challenges, with potential implications for both buyers and sellers.

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