The average home value stands at a five-month low of £292,598, down a typical £1,066 from September, according to the Halifax House Price Index. Annual growth slowed to 8.3% in October from 9.8% in the previous month.

First-time buyer prices saw the biggest drop from 10.1% growth in September to 7.5% in October.

All regions, except the North East were impacted by lower growth over the same time period.

London lags other regions with house prices up 6.8% over the last 12 months – though this remains the biggest cash increase of any UK region over the past year at £34,900.

The slowdown comes off the back of September’s ill-fated mini Budget which panicked markets and pushed up mortgage rates.

House prices could fall further

Critics say house prices are likely to dip further in the coming months with the economy predicted to go into recession.

Kim Kinnaird, director Halifax Mortgages, said: “While a post-pandemic slowdown was expected, there’s no doubt the housing market received a significant shock as a result of the mini Budget which saw a sudden acceleration in mortgage rate increases.

“While it is likely that those rates have peaked for now – following the reversal of previously announced fiscal measures – it appears that recent events have encouraged those with existing mortgages to look at their options, and some would-be homebuyers to take a pause.

“The rising cost of living coupled with already stretched mortgage affordability is expected to continue to weigh on activity levels. With tax rises and spending cuts expected in the Autumn Statement, economic headwinds point to a much slower period for house prices.”

House price ‘correction’ on the horizon

Several experts feel that the house price growth could be on the slide for some time to come.

Sarah Coles, Senior Personal Finance Analyst, Hargreaves Lansdown, said: “Mini Budget mayhem exacerbated house price misery, with prices dropping faster than they have in over 18 months. And with recession looming, there’s every sign that confidence is draining from the market.

“House prices have fallen for three months out of the past four. The housing market doesn’t always move in a straight line, but clearly a downward trend is developing.  We’re not getting near the realms of price falls yet, with annual growth still at 8.3%, but given it has fallen back from a peak of 12.5% in June, it would be foolish to rule out significant annual price drops in the coming months.

“Of course, the lag in the sales process means we may not see significant falls for a while, and the annual figure may remain positive for months. But it’s increasingly difficult to look ahead and not see a housing market correction as we go into 2023.”

First-timers feel the pinch

Meanwhile Myron Jobson, Senior Personal Finance Analyst, interactive investor, pointed out that first-time buyers could still be particularly badly affected, despite the fall in house price growth.

He said: “First-time buyers continue to have a rough time. Home prices remains high compared to yesteryear and mortgage rates have risen, while soaring inflation is eating into disposable incomes – making it harder to save for a deposit. Fast-rising rents are not offering any relief and could keep some wannabe homeowners in the hunt for a home for longer than they would like.

“While home prices are still above what they were one year ago, with a lack of inventory of homes propping up prices in many parts of the UK, it is clear that the runaway housing market is running out of stem as affordability pressures bite.”