According to the latest House Price Index by Halifax, house prices have fallen by 0.1% in September, signalling a continued housing market slowdown.
Halifax has released its latest House Price Index (HPI), with further indications of a housing market slowdown.
While in August the high street bank has reported a 0.3% increase in house prices, September saw house prices fall marginally by 0.1%.
Annual house price growth has also fallen and now stands at 9.9%, according to Halifax, which has fallen from 11.4% in last month’s HPI, which means the average house price in the UK is now £293,835.
A Housing Market Slowdown Has Been Seen In All Regions
While Wales continues to be the best performing region, with an annual growth rate of 14.8%, even there a slowdown is palpable, with the year-on-year growth having fallen by 1% compared to August.
In England, the West Midlands are now on top of the table, with a strong annual price rise of 13.3%, slightly down from 13.5% in August. As a result, the average house price in this region is now £255,822.
The annual house price growth in Northern Ireland has fallen from 12.5% in August to 10.9% in September, with an average home in this country now costing £184,570.
The lowest annual growth rate of all UK nations has been seen in Scotland, where it fell from 9.3% in August to 8.5% in September.
But London is the region with the slowest growth rate overall with house prices having risen only by 8.1% over the past year. However, despite this, the capital remains the most expensive area in the country, with the average house costing £553,849.
Other Signs Market Is Cooling Down
While house prices are a good indicator as to how buoyant the market is, there are other indicators that signal a housing market slowdown.
According to figures by HMRC, residential property transactions were 4.2% lower in the period June to August 2022 than in the previous three months.
Data from the latest Royal Institute of Chartered Surveyors (RICS) shows that buyer demand has fallen by 13% in August. As have the number of sales agreed and the number of new instructions in August, both by 9%, compared to last month.
It shows that the continued economic uncertainty, which has been increased by the fallout from the recently announced so-called mini-budget, has changed the sentiment of buyers and sellers.
Rising Interest Rates And Cost-Of-Living Crisis Increasing Financial Pressure
With inflation still high and the economic situation volatile, it is expected that the Bank of England will continue to raise interest rates, which will increase mortgage rates.
Already, the average five-year fixed-rate mortgage has reached 6.02% last week, according to data from Moneyfacts. Mortgage rates for a two-year fixed-rate have increased to 6.11%.
A direct result of the Chancellor’s mini-budget, which has seen hundreds of mortgage products being withdrawn from the market by a wide range of lenders.
It is widely expected that mortgage rates will rise further in the next year, making borrowing more expensive still.
The Bank of England rate is at its highest level now since 2008 and the expectation is that the rate will increase further over the next year. I think the markets are forecasting a rate of 5.5% by the middle of next year. So we can expect an increase in the cost of borrowing as we move forward.
Will Carroll, Monmouthshire Building Society
Not only does this push up the cost of borrowing and, as a result, of buying a house, but it also puts pressure on households with existing mortgages, which are not on a fixed rate.
Combined with an increase in domestic energy bills in October and the continuing high cost of living, the housing market is bound to slow down further.
Some experts even expect house prices to fall considerably over the coming years, some believe by as much as 10% over the next two years.
Such a high percentage might worry some sellers. However, it should be considered that house prices have risen by a staggering 20% in the past two years, fuelled by the race for space caused by the pandemic.
So even if house prices will fall by 10% over the next two years, it wouldn’t be a major concern for the market.
Other experts believe that the lack of supply will continue to push up prices, despite the financial pressures, and that a 5% increase until next year is possible.
Rising interest rates, inflation, a cost of living crisis and a drastic cut in mortgage cuts are a perfect storm of factors which, during any other time, might have led to a house price crash. Yet in reality prices are actually holding firm. And in many parts of the UK, especially in the north and in regions of the Midlands, prices are still going up. We estimate there will be rises of around 5% over the next six months.
Jonathan Rolande, Director of the National Association of Property Buyers
Although there are clear indications of a housing market slowdown, the market seems robust and a crash is not expected by industry insiders.
