The average price of a house in the UK fell by 0.4% in September to £278,601, marking the sixth consecutive month of decline.
The Halifax house price index showed the decline was softer than August when there was a 1.8% fall compared to the previous month.
On an annual basis, average house prices dropped by 4.7%. The bank said house prices were now similar to the level seen in early 2022.
However, property prices are still 1% higher than they were when the base rate was first increased in December 2021, from a record low of 0.1% to 0.25%.
But it added that there tends to be a “lag effect” between base rate increases and the impact of higher mortgage costs on house prices. Nonetheless, Halifax said house prices were resilient despite the rising base rate.
National and regional changes
Halifax’s house price index recorded a decline across all of the nations and nine English regions.
It said the largest drop in house prices was seen in the South East of England, where there was a 5.7% annual decline to an average house price of £376,450.
In Northern Ireland, average house prices fell by a marginal 0.2% to £184,108. This was only £400 lower than the same period last year and Halifax said prices in the country were the most resilient.
In Scotland, there was a 0.8% fall in average house prices to £201,594, while a 3.6% drop was recorded in Wales where there was an average house price of £214,585.
Price correction is easing
Kim Kinnaird, director of Halifax Mortgages, said: “Activity levels continue to look subdued compared to recent years, with industry data showing lower levels of new instructions to sell homes and agreed sales. Borrowing costs are the primary factor, given the impact of higher interest rates on mortgage affordability.
“Against this backdrop, homeowners inevitably become more realistic about their target selling price, reflecting what has increasingly become a buyer’s market.”
Kinnaird said the base rate was likely to be at or around its peak and fixed rate mortgage pricing was starting to ease. She said wage growth had also helped with affordability.
However, Kinnaird added that as the base rate was expected to remain elevated for a while, this would keep mortgage rates relatively high which would constrain buyer demand and put downward pressure on house prices.
Jonathan Hopper, CEO of Garrington Property Finders, said: “The big question now is how the easing of mortgage rate escalation might feed through into both prices and the number of sales. While no one is expecting mortgages to get significantly cheaper any time soon, fixed rate deals have come down from their recent highs and there’s a growing hope that the peak is past.”
Alan Davison, personal finance distribution director at Together, said: “House prices may have dipped further, but in truth this won’t completely undo the increases seen over the last four years. And while recent news of falling inflation may also spark hope for first-time buyers and borrowers hunting for cheaper rates; we’re not out of the woods just yet.”