UK House Prices Drop 0.6% in October, Steepest Fall Since 2023
UK house prices dropped 0.6% in October, the fourth monthly decline in a row. Lloyds says it is the sharpest monthly fall in over three years, with high mortgage rates holding back buyers.
Where prices ended October
The average UK property cost £296,285 last month. Analysts had expected a small rise of 0.1%. That would have been the first monthly gain since June. Instead, the drop was the largest since Lloyds recorded a 1.6% fall in August 2023.
Compared with October last year, prices are down 1.2%. That is the biggest annual fall since October 2023.
Borrowing costs stay high
Moneyfacts puts the average two-year fixed mortgage at 5.97% and the average five-year fixed rate at 5.99%. The Bank of England had acted a day earlier, lifting the base rate by a quarter of a point to 4%. It was the first increase in three years, aimed at inflationary pressure caused by the Iran war.
The conflict has pushed oil above $100 a barrel in recent months. Fuel prices have soared, and inflation reached 3.5% in September.
Cautious buyers
Andrew Asaam, mortgages director at Lloyds, said: "Housing demand is currently being tested by a challenging economic backdrop." He pointed to renewed inflationary pressure, partly driven by the conflict in the Middle East, which is keeping borrowing costs up.
Amy Reynolds, head of sales at the Richmond estate agency Antony Roberts, said buyers are still around but careful. She named remortgagers and second-steppers, who try to stretch to one more bedroom, as the people hit hardest. In her words: "The real damage is psychological."
A weaker south of England
Annual price growth remains relatively strong in Northern Ireland, Scotland and Wales. Pressure is building in the south of England. Greater London saw the largest annual decline, with prices down 3.1% to an average of £524,892.
The south-east and south-west of England followed, each with a 2.4% annual fall. Average prices there are £379,258 and £298,057 respectively.
Forecasts and the portal view
The property services company Savills said this week that it does not expect Britain's sluggish housing market to recover until 2028. It expects a better economy and improved mortgage affordability to support the upturn by then.
On Friday the property portal Rightmove cut its revenue and profit growth expectations to the lower end of its guidance. Its results covered the four months to 31 October. It said high mortgage rates cut buyer demand by 10% and agreed sales by 9%. Record numbers of homes on the market are adding some downward pressure on prices.
Other gauges point the same way. Bank of England data show home mortgage approvals fell to 53,443 in September, the lowest monthly figure since December 2023. Nationwide reported flat prices for October, with annual growth the slowest in more than two years.
Source: the Guardian