The average UK house price fell by 1.2 per cent to £296,285 in the 12 months to October, marking the steepest decline in more than three years, according to the Lloyds house price index.
This represents a significant acceleration compared to the 12 months to September, when prices dipped by just 0.1 per cent, and follows the Bank of England's decision to raise interest rates this week, which has put buyer confidence at risk of falling further.
Regional variations and market pressures
London's housing market remained the hardest hit by climbing mortgage rates and concerns over runaway inflation. The capital's average house price fell by 3.1 per cent to £524,892 in the year to October.
This contrasted sharply with price growth of 2 per cent and 2.2 per cent in the North East and North West of England respectively.
Property market specialists warned that the rate rise will compound difficulties facing buyers, who are holding back in anticipation of more favourable conditions, and sellers, who are cutting asking prices to secure a sale.
Industry reaction and outlook
Andrew Asaam, mortgages director at Lloyds, said: "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."
He added: "Looking ahead, 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."
Help to Buy scheme anticipation
Prospective homeowners and housebuilders are anticipating the launch of the government's relaunched Help to Buy scheme in April next year. The initiative provides equity loans to assist first-time buyers in meeting their deposit requirements, and is based on the scheme originally introduced by former chancellor George Osborne.
Housebuilders and property specialists have indicated the scheme will deliver a welcome fillip to the housing market, though they voiced criticism over its postponed launch date and the £650,000 limit on inner London properties.
Nathan Emerson, chief executive of estate agency trade body Propertymark, said the scheme will "potentially make homeownership more accessible to people across England."
He added: "Nevertheless, renewed inflationary concerns and yesterday's increase in the base rate will continue to weigh on consumer confidence, particularly as households remain mindful of the cost of living."
Jason Tebb, president of property portal On The Market, said mortgage lenders had already priced in Thursday's hike to interest rates, so the decision is unlikely to trigger a substantial spike in borrowing costs. "But with further rate increases expected if inflation continues to rise, this will inevitably result in higher borrowing costs and challenge affordability going forward," he said.
