UK house prices experienced their sharpest annual decline in 14 years, according to data from Halifax. Prices fell by 4.6% in August compared to the same month last year, the largest year-on-year drop since 2009. The average UK home now costs £279,569, down about £14,000 over the past 12 months, marking the lowest level since early 2022.
The decline is attributed to high interest rates and a seasonal summer slowdown. The Bank of England has raised interest rates 14 times since December 2021 to 5.25%, pushing the average two-year fixed mortgage rate to around 6.67%. This has deterred potential buyers and slowed market activity.
Kim Kinnaird, director of Halifax Mortgages, noted that the summer months typically see a slowdown, but the pace of mortgage rate increases in June and July exacerbated the situation. She said prospective buyers may be deferring transactions in hopes of more stable rates in the coming months.
Halifax predicts further price falls into the new year. However, Kinnaird pointed out that rising wages have improved affordability for first-time buyers, with the house price-to-income ratio falling from 5.8 in June last year to 5.1, the most affordable level since June 2020.
Bank of England Governor Andrew Bailey indicated that interest rates may be nearing their peak, though another quarter-point rise to 5.5% is expected at the next policy meeting on 21 September.
