House prices fall by 0.4% in September, but pace of monthly decline slows

UK house prices fell again in September, but the pace of the monthly decline slowed, according to the Halifax.

The lender said the average house price fell by 0.4% in September, compared to a drop of 1.8% in August and that property prices were 4.7% down on an annual basis, compared  to -4.5% last month.

It added that the typical UK home now costs £278,601, around the level seen in early 2022, and that average prices remain more than £39,000 above pre-pandemic levels. The South of England continues to see most downward pressure on property prices.

Kim Kinnaird, Director, Halifax Mortgages, said: “UK house prices fell further in September, edging down by -0.4% on a monthly basis. This was a sixth consecutive monthly fall, though the pace of decline slowed markedly compared to August (-1.8%).

“The average home now costs £278,601, a drop of around £1,200 since last month. On an annual basis prices are down by -4.7%, largely unchanged from -4.5% in August. Nonetheless they remain some £39,400 higher than in March 2020, such was the extraordinary growth seen during the pandemic.”

Kinnaird added: “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.

“However, with Base Rate now likely to be at or around its peak, we are seeing fixed rate mortgage deals ease back from recent highs. Wage growth also remains strong, which has helped with affordability, with the house price to income ratio now at its lowest level since June 2020 (6.2 in September vs 6.3 in August).

“Many economists and financial markets predict that Base Rate will remain higher for longer, with any significant cuts appearing unlikely until inflation gets closer to the Bank of England’s 2% target. Overall, these factors are likely to keep mortgage rates elevated in comparison to recent years, constraining buyer demand and putting downward pressure on house prices into next year.”

The Halifax added that all UK nations and the nine English regions registered a decline in house prices on an annual basis. It said prices are under the greatest downward pressure in the South East of England, falling by -5.7% over the last year (average house price of £376,450).

Meanwhile, Northern Ireland currently has the most resilient house prices, down by just -0.2% compared to this time last year (average house price of £184,108), a fall of less than £400. Scotland also experienced a relatively modest annual decline of -0.8% (average house price of £201,594).

Wales saw property prices fall by -3.6% over the last year (average house price of £214,585). London remains the most expensive place in the UK to purchase a home, with an average property price of £525,678. With prices down by -4.8% over the last year, it has seen the biggest fall of any region in cash terms (-£26,514).