Rising mortgage costs and the broader cost of living crisis will put downward pressure on UK house prices in the coming months, according to Halifax.
The latest data on real estate prices from the mortgage company reveal that the average price of a home fell by 0.1% in September.
Halifax said market activity had cooled in the past month, with a further slowdown expected in coming months as rising borrowing costs make it harder to buy a property.
“The housing market may have already entered a more sustained period of slower growth,” said Kim Kinnaird, director of Halifax Mortgages. “The prospect that interest rates will continue to rise sharply amid the cost-of-living contraction, plus the impact in recent weeks of higher home loan costs on affordability, is likely to put pressure on the significant decline in housing prices in the coming months”.
Last week, the five-year average fixed rate mortgage topped 6% for the first time in 12 years, while the two-year average fixed rate topped the mark for the first time since 2008.
Nearly 1,000 deals have been pulled from the market in recent weeks after Kwasi Kwarteng’s mini-budget triggered a sell-off in financial markets and raised expectations of even higher interest rates.
Halifax said a typical UK property now costs £293,835 as the pace of annual growth slowed for the third consecutive month, from 11.4% in August to 9.9% in September, the first time it has fallen to a single digit since January.
Industry reaction:
Tom Bill, Head of UK Residential Research at Knight Frank, commented: “It’s a pretty safe bet that UK house prices have now peaked. The impact of rising mortgage rates will start to affect demand and purchasing power in the coming months, which we believe will lead to a 10% drop over the next two years in UK prices.
“We may see mortgage rates fall to some extent if financial markets become more reassuring about the government’s economic plan, but the events of the last fortnight have been a reminder that the era of ultra-low rates is coming to an end.” “.
Matthew Thompson, Chestertons Sales Manager, He said: “The expectation that London property prices could see an adjustment has led to a surge in demand from buyers in the capital last month.
“Compared to August, there were 17% more shopper inquiries in September and 18% more views. We are also seeing a growing number of home seekers who want to secure a property as soon as possible and take out a fixed rate mortgage. This has contributed to keeping the real estate market in September active and competitive.
“As the cost of living crisis looms, some buyers are compromising their priorities to secure a property below their initial budget.”
Emma Cox, MD of Shawbrook Real Estate, commented, “High inflation and rising interest rates have created a challenging scenario for prospective homebuyers.
“While the introduction of a stamp duty cut on properties up to £250,000 may offer a glimmer of hope for people currently in the process of buying property, many will wait to see which way the wind turns before commit to buy.
“In an uncertain political and economic context, house prices are likely to continue to suffer, at least in the short term. More needs to be done to ease cost-of-living concerns and restore consumer confidence, as well as address long-term supply issues.
“As many still rely on the private rental sector, it is vital that landlords are supported and encouraged to provide quality, safe and sustainable properties.”
Iain McKenzie, CEO of The Guild of Property Professionals, he said: “Homebuyers are still coming to terms with the sudden jump in fixed-rate mortgages, and it will be some time before we see the full impact.
“Many potential buyers are rushing purchases before their approved deal runs out, while others are seeing their hopes of buying fade before their eyes.
“The cooling in house prices seen in these numbers is due to the broader cost of living crisis, with energy bills at record highs and inflation hitting many households.
“While getting a good mortgage deal has become significantly more difficult, a downturn in the market is not as likely as some economists are forecasting.
“Real estate agents still see stock shortages in many areas of the country, something that has supported elevated home prices during the boom.
“The new government stamp duty changes will appeal to first-time buyers on the acreage, however being able to take advantage of the change will largely depend on whether they can secure a mortgage deal.”
Phil Tennant, COO of iBuyer UPSTIX, He said: “A little-discussed aspect of a potential housing market downturn is the fact that even more housing chains will collapse. One in five real estate chains are already collapsing, and this will only increase for reasons of mortgage unaffordability, changes in valuations, or simply cost of living calculations.
“In this context, those who are currently involved in the buying or selling process would do well to speed things up where they can. While the market has currently shown no signs of a major downturn, given all the market noise, expect sellers to face increasing difficulty closing deals, especially as many buyers may find it more difficult to obtain a mortgage. “.
Nicky Stevenson, managing director of the national group of estate agents Fine & Country, commented: “September data shows house price growth cooling slightly even ahead of the Chancellor’s mini-budget speech that came later in the month.
“Looking ahead, many buyers now find themselves in a holding pattern as they wait for the dust to settle from the shock waves the mortgage market has felt.
“As the pound has fallen, uncertainty over how high the Bank of England base rate could get has led to further volatility, with many lenders withdrawing loan deals as they reassess affordability criteria and stress tests.
“This is a frustrating time for buyers as they wait for conditions to normalize and confidence to return to the market.
“However, the weakness of the British pound offers a window of opportunity for foreign investors.
“In higher value market areas such as London, significant savings can now be achieved compared to the start of the year and we are already seeing an increase in overseas interest.”
Jason Tebb, CEO of OnTheMarket.com, He said: “With median home prices declining slightly in September compared to August and the annual rate of growth continuing to decline, the inevitable rebalancing of the market is evident as rising inflation, interest rates and the prospect of Higher energy bills have an impact.
“As more stock becomes available, prices stabilise, although this picture is not consistent across regions with some, such as the West Midlands and South West, experiencing significantly higher house price inflation than others.
“As the rising cost of living and mortgage rates prey on the minds of buyers when making offers, new properties that come on the market that are not realistically priced will have a hard time selling.”
Mortgage rates are set for another big hike today as lenders review deals
