House prices fall again amid high borrowing costs - Halifax

Annual house prices fell again in September as high borrowing costs continued to dent the market, according to Halifax.

House prices declined by 4.7% on the year, following a 4.5% drop in August.

On a month-on-month basis, house prices were down 0.4% in September following a 1.8% decline the month before.

The average price of a home now stands at £278,601, which is around the level seen in early 2022.

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.

"However, with Base Rate now likely to be at or around its peak, we are seeing fixed rate mortgages 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 versus 6.3 in August)."

Last month, the Bank of England stood pat on interest rates for the first time in nearly two years, at 5.25%.

Andrew Wishart, senior property economist at Capital Economics, said: "Looking ahead, the rise in long term-interest rates in financial markets has prevented the interest swap rates which fixed mortgage rates are based on from declining further.

"Therefore, we continue to think that mortgage rates will stay around their current high level until next summer. That will mean demand stays weak at the same time as the amount of homes up for sale is rising to more normal levels. The result will be further house price declines, of 5-6% on top of the 5% we have had already."