UK HALIFAX HOUSE PRICE INDEX

UK house prices fell by 0.4% month-on-month in October versus a 0.1% drop in the previous month. Annual house price growth came in at 8.3%, slowing from 9.8% in September.

There was a notable slowdown in October’s annual house price growth, while the monthly rate posted the steepest drop since February 2021, confirming other recent indicators that the UK housing market is starting to cool.

The cost-of-living crisis, an imminent recession and rising mortgage rates are weighing on demand, while a chronic shortage of supply continues to stem an even steeper decline. First-time buyers are struggling to get onto the housing ladder, pushing up prices in the rental market as rising interest rates from the Bank of England make houses and flats less affordable. There is a growing expectation that house prices will continue to sink into next year with demand in greater London getting hit hardest.

Estate agent activity has fallen off a cliff since the mini-budget, with many potential buyers in wait-and-see mode until lending markets settle down again. On top of that, with a growing expectation that house prices will decline into next year, many potential buyers are holding off and waiting until 2023 when property is likely to be on sale, exacerbating the present downward pressures on demand.

Kim Kinnaird, director of Halifax Mortgages, said: “While a post-pandemic slowdown was expected, there’s no doubt the housing market received a significant shock as a result of the mini-budget which saw a sudden acceleration in mortgage rate increases. While it is likely that those rates have peaked for now – following the reversal of previously announced fiscal measures – it appears that recent events have encouraged those with existing mortgages to look at their options, and some would-be homebuyers to take a pause.

“Understandably we have also seen consumer caution grow, as industry data shows mortgage approvals and demand for borrowing declining. The rising cost of living coupled with already stretched mortgage affordability is expected to continue to weigh on activity levels. With tax rises and spending cuts expected in the Autumn Statement, economic headwinds point to a much slower period for house prices.”