UK house prices have reportedly fallen 0.4% between November and December, following a year-long trend of steady growth. Average house prices rose 9.8% in the year leading up to December, though the rate has dropped from 10.3% in November. The average house price reached a staggering £294,000, which is £26,000 higher than a year earlier. However, this is a slight decline from the record high of £296,000. London’s average house prices are even higher at £543,000, but have only increased by 6.7% in the past year. The decrease in house prices is said to be due to recent mortgage rate hikes.
“House prices were on the slide in December, and this is just the start of what’s likely to be an increasingly slippery slope. Prices were tipped over the edge by mortgage hikes, and we can expect momentum to sustain monthly slides until eventually the annual figures hit negative territory. There’s plenty of disagreement over how far they’ll fall – and how long for – but there remains a broad consensus that we’re heading downhill.
It seems ridiculous, but it has taken until now for us to see early signs of the impact of September’s mini-budget in the official figures. Sales typically take around three months to complete, but at the moment they’re taking closer to four. It means December’s completion figures reflect how the market was looking in September and October. This covered the onset of the mini budget mortgage mayhem. However, even at this stage it won’t have captured the full impact of mortgage rate hikes, because an awful lot of people making buying decisions at this point had already agreed a mortgage at a much lower rate. Instead, we’re seeing the impact on their confidence that they could continue to pay the mortgage in future.
The full effect of the mini-budget is clearer in mortgage approval data for future purchases. The number of approvals have been dropping since September, and hit 35,600 in December – the lowest level since the market was effectively closed in May 2020. The Nationwide and Halifax indices showing house prices among those approvals have also recorded monthly falls for four months, and the annual rise was less than 2% in January.
Commentators are divided on when annual house price rises will turn negative, and how far prices will fall, which makes it a tricky time to make buying or selling decisions. Anyone who can afford to wait may well decide to put it off until at least the spring. By then fixed mortgage rates may well have fallen further, and we’ll have a better idea of house price movements. If they’re on a slow slide it may not be so off-putting. If they’re falling faster it might encourage some buyers to hold off for even longer, while others will seize the opportunity to negotiate a decent discount and bag a bargain”. Commented Sarah Coles, head of personal finance at Hargreaves Lansdown.
ONS House price data for December was released today: UK House Price Index – Office for National Statistics (ons.gov.uk)
Land registry data for November was also published: UK House Price Index: reports – GOV.UK (www.gov.uk)
