The average house price is down £14,000 compared to the recent peak in August 2022, according to the latest data from major mortgage lender Halifax.
Its house price index reported a 4.7 per cent fall in the year to the end of September, the largest drop since 2009.
This means that the typical home in Britain is now worth £278,600 compared to around £291,700 a year ago.
This was an increase on the 4.5 per cent annual drop reported in August, and Halifax said house prices have now returned to a similar level as early-2022.
Price falls: The average UK home is worth £14,000 less than in summer 2022, Halifax says
However, house prices fell less on a monthly basis in September than they did in August.
The average property reducing by 0.4 per cent, compared to 1.8 per cent the previous month, in the sixth consecutive monthly fall.
Earlier this week, rival lender Nationwide’s house price index reported a fall of 5.3 per cent or around £14,500 on the year. The data is based on their respective mortgage lending.
Halifax said more expensive mortgages were the biggest factor in pushing up house prices, saying that homeowners were selling their properties for less in a ‘buyer’s market’.
According to the financial information service Moneyfacts, the average two-year fixed mortgage is currently priced at 6.43 per cent, and the typical five-year fix is 5.97 per cent, taking into account all deposit sizes.
That is a substantial reduction compared to 6.7 per cent and 6.19 per cent on 4 September.
But this time two years ago, the averages were hovering around 2.75 per cent for a five-year fix and 2.5 per cent for a two-year.
Kim Kinnaird, director of mortgages at Halifax, said: ‘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.’
Borrowers can find the best mortgage rates available to them using the This is Money mortgage service.
Yearly drop: This shows how much prices have gone down in one, three and 12 months
Kinnaird said that, while mortgage rates were now falling, they remain higher than many borrowers are used to and that this would mean house prices continued to fall into 2024.
She added: ‘With base rate now likely to be at or around its peak, we are seeing fixed rate mortgage deals ease back from recent highs.
‘Many economists and financial markets predict that base rate will remain higher for longer, with any significant cuts appearing unlikely until inflation gets closer to the Bank of England’s 2 per cent target.
‘Overall, these factors are likely to keep mortgage rates elevated in comparison to recent years, constraining buyer demand and putting downward pressure on house prices into next year.
‘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.’
Halifax said that despite recent falls, house prices had been ‘more resilient than expected’ since the Bank of England began increasing its base rate in December 2021.
These interest rate increases have had the effect of pushing up mortgage rates, making monthly payments less affordable for many.
House prices remain up by 1 per cent on December 2021 when the base rate first began increasing, Halifax said.
However, it added that ‘there is often a lag-effect between rate increases and the full impact of higher mortgage costs on house prices’.
It also said that the effects of the pandemic house price boom have not been completely wiped out, with average prices remaining more than £39,000 above pre-pandemic levels.
Tom Bill, head of UK residential research at estate agent Knight Frank, said he thought house prices would return to modest growth next year.
‘The financial pain entering the system will continue next year as people roll off fixed-rate deals, but there will be an improvement in sentiment, that vital lubricant in the housing market,’ he said.
‘We therefore think most of the UK’s house price correction will happen this year and modest single-digit annual growth will return after the next general election.’
South East England sees biggest house price falls
All regions of the UK registered a decline in house prices on an annual basis in September, according to Halifax.
They have fallen most in the South East of England, reducing by 5.7 per cent over the last year to make the average house price of £376,450, it said.
Regional report: This shows how much house prices have fallen in different parts of the UK
Northern Ireland currently has the most resilient house prices, down by 0.2 per cent compared to this time last year with the average house price now £184,108, a fall of less than £400.
London remains the most expensive place in the UK to purchase a home, with an average property price of £525,678. With prices down by 4.8 per cent over the last year, it has seen the biggest fall of any region in cash terms at £26,514.
Jeremy Leaf, north London estate agent and a former Rics residential chairman, said: ‘Results confirm what we are seeing on the ground – business is bumping along at a new, lower level as buyers and sellers are encouraged partly by expectations of lower interest rates and higher rents making refuge in the lettings market less likely, particularly for those taking their first steps on the ladder.’
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