UK house prices fell by an average of 1.2% in the 12 months to October, bringing the average property price to £296,285, according to a new index from Lloyds Bank. London recorded its biggest annual fall in three years, with prices dropping 3.1%.
Regional price changes
The average property price in London now stands at £524,892, the highest in the UK, while the North East has the lowest at £184,318, a rise of 2%. This leaves a £340,574 gap between the most and least expensive regions.
The South East and South West both saw prices fall by 2.4%, while the East Midlands and West Midlands saw the smallest drop at 0.3%. Some regions saw increases, including Northern Ireland (4.4%), Scotland (2.8%), the North West (2.2%) and the North East (2%).
Reasons behind the fall
Andrew Asaam, mortgages director at Lloyds, said: 'Housing demand is currently being tested by a challenging economic backdrop.' He added that 'renewed inflationary pressures, driven in part by the conflict in the Middle East, are keeping borrowing costs high and adding to the squeeze on household finances, making some buyers understandably more cautious.'
Asaam noted that 'it's important to put October's fall in context. House prices have changed relatively little over the past couple of years, as the market has gradually adjusted to higher interest rates.' He also said that 'the recent rise in energy and other household costs have added to the pressure on buyers, so some adjustment in prices is not surprising.'
Outlook
Looking ahead, Asaam said: 'Conditions are likely to remain subdued in the near term, but we don't expect this to lead to a sustained period of falling house prices.' He added that 'with wages continuing to rise faster than property prices, the gap between earnings and house prices should gradually narrow, helping affordability to improve over time.'
Around 87% of outstanding homeowner mortgages are on fixed-rate deals, but roughly 2.3 million of these are due to expire in 2027, according to UK Finance. This comes as interest rates rose this month for the first time since August 2023.
