UK house prices fell at fastest annual rate since 2009 in August

, by Matt Stevens

A recent index from Halifax has shown that house prices are falling at their fastest annual rate since the financial crisis of 2009. Specifically, the average UK house price dropped by 4.6% last month (August 2023).

Followingly, the average cost of a home now stands at £279,569, this figure having decreased by around £5,000 since July. This means that such levels now closely represent what they were at the beginning of last year.

Indeed, the typical property value dropped by 1.9% month on month in August, which is the most substantial one-month decrease since November 2022 when the mini-budget sent the housing market into turmoil.

Despite the significant year-on-year decline outlined here, it should be said that Halifax also noted that the average house price still remains 17% above pre-pandemic levels. Likewise, the fall is relative to the record-high property prices which the market saw last Summer.

As to the cause, the state of high interest rates has undoubtedly led prospective homeowners to hold off so as to wait for deals to become more stable.

For context, the Bank of England raised the base rate again in August, marking fourteen successive increases to a total of 5.25% in hopes of battling inflation. This, in turn, dictates how much many lenders decide to charge for their mortgage loans.

And so, because of high interest rates making mortgages less affordable, there hasn't been as much demand from buyers in the housing market. As a result, the market has slowed down, subsequently meaning house prices are dropping.

A representative of Halifax said that the mortgage lender expected further downward pressure on property prices through to the end of 2023 and into the next year, as in accordance with previous forecasts.

In essence, the levels mentioned here go a way in partially offsetting the higher mortgage costs that some people are facing.

Moreover, the current volatility regarding interest rates is not expected to last and the market will eventually continue to rebalance to a more stable position, where people will then feel it is fundamentally more comfortable to purchase a house.

Albeit, particularly in the Northern regions of the UK, house prices are proving to be quite resilient against the general reductions. As per Halifax’s report for average year-on-year decreases across the UK:

  • South East: -5.0%

  • Wales: -4.7%

  • South West: -4.4%

  • London: -4.1%

  • Eastern England: -3.4%

  • East Midlands: -2.8%

  • North West: -1.6%

  • Northern Ireland: -1.5%

  • North East: -1.2%

  • Scotland: -0.6%

A further consequence of high interest rates, beyond affordability concerns, is that mortgage approvals have also fallen. In July 2023, mortgage approvals dropped by almost 10%.

Therefore, notwithstanding the market slowdown, there’s still an evident demand for housing, it’s just that more and more people are being rejected as borrowers.

One standout way of improving your chances of getting on the property ladder is by having an expert mortgage broker at hand to fully evaluate your case and options.

We at The Mortgage Genie see a wide range of opportunities in the market today and are committed to helping people secure a mortgage product that’s right for them. If you want to increase your chances of getting onto the property ladder with a deal that has competitive interest rates, then be sure to give us a call at 01915809890 and we’ll begin working on a mortgage solution tailored to you. And why not see how much you could borrow up to right now by using our mortgage calculator?

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