Property price inflation weakened across all buyer types during October, but annual price growth among home movers was still up 8.9%, albeit down from 10.3% in September, according to the latest Halifax house price index.
The UK’s biggest mortgage lender said the picture was worse for first-time buyers with annual growth falling to 7.5% in October, down from 10.1% in September.
But given the greater challenges for first-time buyers in deposit-raising, plus tighter requirements for higher loan-to-value mortgages, the relatively faster slowdown in prices is not surprising.
All English regions with the exception of the North East experienced weaker annual price inflation during October compared to September.
However, the West Midlands now has the joint highest annual growth of any UK region at 11.7% (average property price of £254,962) down from 13.2% the previous month.
Wales saw the same rate of annual growth at 11.7%, though this was a fall from 14.4% (average property cost of £222,852).
Scotland has also seen its pace of annual house price inflation slow to 7.5% (from 8.3%) with a typical property now costing £203,820.
House prices in Northern Ireland are up 9.5% year-on-year, easing back from 10.9% last month.
At £184,440 the average house price remains some £46,500 below its pre-financial crisis peak in mid-2007.
The pace of annual property price inflation also slowed in London, which continues to lag the other UK regions and nations. House prices have risen 6.8% over the past 12 months. However, given the cost of the capital’s average property (£551,320), London still recorded the biggest cash increase of any UK region over the past year (+£34,900).
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Sofia Jones, managing director at London-based independent mortgage broker, Penny House:
“Few will be surprised at the sharp slowdown in annual price growth in October. Over the past five to six weeks, since the now infamous mini-Budget, demand from buyers understandably dropped off a cliff as mortgage rates shot up and the government fell into chaos.
“Where we were active in October was with requests to remortgage as people sought to protect themselves as best they can. We’re predicting a busier November and December as buyers who held off in October amid the chaos decide to move forward with their purchases, as they see lenders reducing their fixed rate deals across the board.”
Hannah Bashford, director of Devon-based Model Financial Solutions:
“The past couple of years have seen house prices hit new heights, growing in double digits across the board due to the stamp duty holiday and the race for space triggered by the pandemic.
“This price growth was never sustainable and has ultimately proved a way of crippling the UK economy because people leveraged themselves up to the hilt on cheap money, and now money is no longer cheap.
“Add the cost of living crisis to the impending remortgage crunch and the only way house prices can go is down. I don’t believe that we will see a drop of 20%+ that some have forecast, as the economy would be on the verge of systemic collapse, with countless households in negative equity.
“But it’s inevitable that prices will need to come down so that people can meet the affordability assessments. Average prices remain near record highs for now, but they’re unlikely to stay there for much longer.”
Natalie Hines, founder at Sutton Coldfield-based Premier One Mortgages:
“Over the past six weeks or so, there has been a definitive slowdown in purchase activity so I’m fully expecting a drop in prices during the year ahead. Sentiment has been hit hard by rising interest rates and people’s buying power is no longer what it used to be.
“I certainly don’t think we’ll see the 20%+ drop in house prices some are predicting, as that would put the entire economy on the brink, but prices are without doubt coming down. I work with a young demographic within the TV industry and they are waiting to see what happens following the latest interest rate announcements and ongoing cost of living crisis.
“A correction in house prices is what’s needed to help get first-time buyers on the property ladder. For many first-time buyers, prices have been out of reach for so long. A house price correction could give them the leg-up onto the ladder that they need. How the jobs market holds up in the next year or so, as the Halifax points out, will be key.”
Nicky Stevenson, managing director at national estate agent group Fine & Country:
She said: “Momentum in the housing market cooled in October as the reverberations from the mini-budget were felt throughout the economy.
“Longer term, tax rises and increased borrowing costs will continue to slow activity as buyers adjust to changing circumstances in the lending market and the broader economy.
“The slowdown may turn out to be less pronounced in the UK’s prime markets where buyers’ wealth means they often come to the table with fewer borrowing requirements.
“As recession bites in 2023, the broader outlook for the housing market may depend largely on the changing political picture both at home and abroad.”
Nathan Emerson, chief executive of Propertymark, the UK professional body for estate agents:
“The latest Halifax House Price Index continues to show a fall away in house prices which, alongside additional help from the new higher Stamp Duty threshold, will now see the purchasing power of first-time and other homebuyers improved.
“There are also more homes for sale coming to the market which is providing buyers with a greater choice. This will therefore mean they can be more level-headed with the offers they’re putting forward which will naturally see a softening in prices being achieved over the next few months.”
Avinav Nigam, cofounder of real estate investment platform, IMMO:
“The annual slowdown in house price growth was expected in the context of higher interest rates. This impact is showing up in the data now, reflecting decisions made earlier in the summer when rates began to rise.
“We are seeing property listings falling by 15% to 20% in some parts of the UK, as uncertainty encourages property owners to delay transaction decisions.
“As it becomes harder and more expensive to buy, demand for rental properties is expected to grow. Meanwhile, many smaller private investors are exiting due to higher finance and regulatory compliance costs. There’s a clear opportunity for professional providers of safe, quality and affordable rental housing for the UK.”
Mark Harris, chief executive of mortgage broker SPF Private Clients:
“House prices fell again in October as higher mortgage costs, as well as the increase in the cost of living, continue to be reflected in the numbers.
“Despite another interest rate rise, with the threat of more to come, the outlook for the mortgage market is much more positive than it has been in recent weeks. Pricing on fixed-rate mortgages continues to settle as Swaps have fallen.
“Lender appetite and competitiveness may also increase as activity falls, adding further impetus to the recent rate reductions. In the meantime, borrowers are opting for tracker or variable mortgages, biding their time until fixes fall further.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman:
“These comprehensive figures are particularly interesting as the modest monthly fall in house prices shows on the one hand the resilience of the market in the period leading up to the mini-Budget, as well as the uncertainty which followed.
“Since then, we’ve seen on the ground a combination of those trying to take advantage of attractive mortgage offers and new buyers slowly emerging now mortgage rates are steadying and even starting to fall. But we are not seeing any collapse in pricing or sales agreed.”
Jon Halbert, mortgage and protection adviser at Ormskirk-based Key Financial Associates:
“House prices falls are a nailed-on certainty. It’s not so much headwinds the property market is facing but a hurricane. As demand for property drops off due to the Bank of England’s rate hikes, sales will inevitably slump. But this alone will not reduce property prices.
“When people become desperate to sell and reduce the sale price of their home below that of the current market value, all the homes in the same street reduce in value to the same level. This is the domino effect that triggers house price falls.
“The rising cost of borrowing will force a growing number of homeowners to sell because their affordability on the new rates when they come to remortgage, coupled with the cost of living, will become impossible. Repossessions will also rise as a result of recent rate rises. If lenders relax their criteria around interest-only mortgages, many will be able to survive potential repossession.”
Andrew Simmonds, director at Bristol-based Parker’s Estate Agents:
“Since the summer, I’ve been telling vendors that their house is worth what it was worth 12 months ago. I’ve lost instructions because they’ve said “nah”. This is mainly because of deluded competitors who feed them bull. Plenty have since come back to me saying “you were right”. I’m expecting average prices to be down 20% by March.”
Elliott Benson, mortgage broker at Sett Mortgages:
“The mini-Budget, or at at least what happened after it, hit sentiment like a sledgehammer. And even though we all knew last week’s interest rate rise was coming, it will still have proved a further shock to many homeowners, especially those who took out sizeable mortgages at record low rates. Higher rates mean people won’t be able to borrow as much, which in turn means they won’t be able to offer as much for property.
“House prices will invariably head south during the next 12 months as people adjust to the new rate environment. I would advise anyone who is still thinking of buying or remortgaging to keep calm, seek professional advice and take the right decision for their own circumstances. Never has independent mortgage advice been more important.”
Paul Holland, mortgage broker at Chatham-based Henchurch Lane Financial Services:
“The property market has seen gargantuan price growth over the past 2-3 years. Healthy and sustainable house price growth is annual growth of circa 2%-3%, not 10%+. When that happens, the wheels invariably come off.
“The growth we’ve seen is mainly due to the stamp duty holiday introduced in the summer of 2020 and demand across the board from people wanting to relocate due to the pandemic. Of course we expect a downturn in prices over the coming 12 months, but this should be viewed more as a correction than anything negative.
“The most likely outcome is a 5%-10% reduction over the coming year. Unless you purchased at 95% last year and intend to sell quickly, this shouldn’t be viewed as too precarious a situation. There will also be some really good buying opportunities for those who are in the right position during the next year or so as prices come down, especially first-time buyers. Assuming they can find the still sizeable deposit, of course.”
Dariusz Karpowicz, director of Doncaster-based Albion Financial Advice:
“I am not convinced that house prices will fall by as much as 30%, as some are predicting. That would be an apocalyptic event in the property market. Prices will undoubtedly stall and we could see drops of 10% in some areas but the lack of supply will act as a glass floor under property values.
“There is a significant shortage of skilled workers and labourers, which limits the number of properties that can be built, which in turn prevents prices from falling materially as there just aren’t enough homes. Demand will drop off for sure, but let’s not forget that there is an acute lack of supply.”
Austyn Johnson, founder at Colchester-based Mortgages for Actors:
“Although the base rate is still not that high when compared to 15-20 years ago, such a sharp and sudden hike for those who have been fixed very low for very long will leave them reeling at the change. Movers will be wary of moving and buyers will be wary of buying. Prices can only come down as people’s borrowing power is reduced and sentiment is hit hard.
“Almost all borrowers will be affected, but worst hit will be the people whose fixed rate ends in the next few months. Some people could see their monthly mortgage payment double. People on variable rates, especially portfolio landlords, will need to get the ball rolling ASAP as they will have increasing costs across their whole portfolio.”
Andrew Montlake, managing director of the UK-wide mortgage broker, Coreco:
“I’ve never seen property market sentiment change in such a short timeframe. The property market was hit for six after the now infamous mini-Budget as mortgage rates soared and many people put their buying plans on hold due to the extreme political uncertainty.
“House prices are set to come under further pressure during the winter months, but the sizeable drops of 10%-15% that some are predicting are frankly implausible given the sheer lack of supply and the fact that the jobs market is still strong.
“A nationwide correction of around 10% is a real possibility after last week’s rate rise by the Bank of England. In reality, a fall of 10% is just the froth coming off the market and a reversal of the unsustainable growth we have had since the Stamp Duty holiday mid-pandemic.”
Ross Boyd, founder of the always-on mortgage comparison platform, Dashly.com:
“To say the outlook is uncertain is an understatement. With inflation where it is, and mortgage rates on a different plane to where they were just six months ago, 2023 could be like 2008 all over again for the property market. Demand dropped off a cliff in October as mortgage rates soared following the mini-Budget and people took stock, but bank rate rising to 3% will see many people firmly batten down the hatches. It’s not inconceivable that average UK house prices could drop by 10%-15% over the course of the next year or two as we enter what the Bank of England predicts will be the longest recession since records began. Much will depend, of course, on how the jobs market holds up. Winter is coming.”
David Robinson, co-founder and wealth manager at London-based Wildcat Law:
“When it comes to the housing market, we are going back to the early 1990s. We are in for a long and drawn out fall in house prices rather than the big drops we saw during the Global Financial Crisis of late 2007 and 2008.
“However, like the 90s. inflation will mean that the real price of properties will fall much further in real terms. The real losers will be pensioners living in detached houses looking to downsize who may not be able to find buyers able to raise mortgages, and people who bought new builds under Help to Buy, which have already shed significant value and are facing the spectre of negative equity.”
Riz Malik, director of Southend-on-Sea-based R3 Mortgages:
“House prices have been rising faster than wages for a number of years, due to the ultra-low interest rate environment making it cheap to borrow money and the stamp duty holiday introduced during the pandemic. But recent rate hikes, political ineptitude and soaring inflation have accelerated the inevitable correction.
“If the housing market drops 30%, as some are predicting, Rishi can forget winning the next General Election and may as well join Matt Hancock on I’m a Celebrity. The number of people facing negative equity and repossessions would go through the roof. Our new PM, fortunately, is a clever guy. If anyone can find a solution to our current economic predicament that has been exacerbated by the previous short-lived administration, it is Rishi Sunak.”
Malcolm Davidson, Director of Hull-based broker, UK Moneyman: “Property prices have risen approx 20% since Covid, which is not sustainable. The so-called experts predicting extreme price falls without fail underestimate the demand for property in the UK. And especially the desire of tenants to get out of the overpriced rental market and own their own homes. Real crashes are predicted all the time but they’ve only ever happened about twice. Everybody is ultimately guessing, as nobody knows. Also, now that Help to Buy has ended, the impact of this is underestimated and re-sale values will be supported by its withdrawal.”
Graham Cox, founder of the Bristol-based broker, SelfEmployedMortgageHub.com:
“My best guess is house prices will fall 15%-20% in 2023. Affordability, for first-time buyers is much tighter, affecting the whole market. Unable to borrow as much, prospective buyers will either wait or offer less. Anyone coming to the end of their dirt cheap fixed-rate deal and unable to afford the higher remortgage rates on offer will be a very motivated seller. Many will reduce their asking prices significantly for a fast sale, causing prices to fall sharply.”
Lewis Shaw, founder of Teesside-based Riverside Mortgages:
“For us, the phone in October was red hot with panic-stricken clients worrying about their mortgages. Thankfully most had nothing to worry about as they’re tied into longer-term fixed rates.
“However, first-time buyers have decided to keep their powder dry in the hopes that both house prices and mortgage rates will fall. The biggest problem is consumer confidence because if everyone assumes prices will fall, then guess what, prices will fall. So the most likely outcome is a 10% price fall over the next year. So if everyone offers 10% lower and you get your home for 10% lower, then no one is really out of pocket.”
Tomer Aboody, director of property lender MT Finance:
“With a fall in prices in October, we are seeing the end of constant increases as buyers and sellers demonstrate more caution due to higher mortgage rates and cost of living.
“As with any fall, buyer sentiment is key but considering external factors affecting everyday life, along with month-on-month increases over the past 18 months or so, the decline is still minimal.
“With fewer transactions in the market, it will be interesting what move the government makes in terms of encouraging more activity, and whether mortgage lenders are more flexible on criteria.”
Jack Roberts, CEO of home moving platform SlothMove.com:
“We’ve had the boom, the question is whether we’ll now have the bust.
“Caution is the watchword, as even Andrew Bailey starts to complain that mortgage interest rates are too high. Prices have only cooled slightly but recent record highs are bound to start disappearing from view.
“Borrowers aren’t silly. They are acutely sensitive to signs the medium-term wisdom of purchases at these sorts of valuations no longer add up. This is especially true if people have reason to fear being greeted by higher interest rates at the end of their next fixed-term mortgage.
“Many purchasers, particularly first-time buyers, have been offered nothing less than a menu of reasons to justify more of a wait-and-see approach. With the rising cost of borrowing, chaos in government, bubbly price rises over the last two years and affordability ratios testing the courage of anyone scraping together a deposit, it’s no surprise the market seems to be turning a corner. First-time buyers are reacting to the shift in the balance of power by forcing a collapse in the annual rate of growth seen in their corner of the market.
“With tax rises on the horizon now too, the only question is how deep the coming correction will be. Factors such as shortage of supply, while they power the market higher in the good times, are no longer such a safety net. We’re entering an unpredictable period where buyers, particularly first-time buyers, will hold off on purchases, hoping to get better prices once valuations sink further.”
Sarah Coles, senior personal finance analyst, Hargreaves Lansdown:
“Mini-budget mayhem exacerbated house price misery, with prices dropping faster than they have in over 18 months. And with recession looming, there’s every sign that confidence is draining from the market.
“House prices have fallen for three months out of the past four. The housing market doesn’t always move in a straight line, but clearly a downward trend is developing. We’re not getting near the realms of price falls yet, with annual growth still at 8.3%, but given it has fallen back from a peak of 12.5% in June, it would be foolish to rule out significant annual price drops in the coming months.
“While mortgage rates have eased very slightly as mini-budget measures were rolled back and Trussenomics was consigned to history, the chaos has taken a toll. It’s not just that rates are now higher, but buyers have had an unsettling shock, which could have a long-lasting impact on their willingness to take the plunge. RICS figures show buyer demand is sliding, and the Bank of England reported that mortgage approvals have fallen. Things are likely to feel even dicier now that the Bank has issued such a dire warning of recession.
“It says we’re set for a miserable period throughout next year and the first half of 2024. GDP is expected to fall about 0.75% during the second half of 2022, as higher energy prices put the squeeze on our disposable income. It’s then expected to keep falling through 2023, and the first half of 2024.
“Meanwhile wages will fall 0.25% behind rising prices this year and 1.5% in 2023, and the unemployment rate is forecast to hit 5.9% at the end of 2024 and 6.4% by the end of 2025 – up from 3.5% in the three months to August. It’s no wonder that people are bound to be considering whether now is such a great time to be stretching their finances and buying a new home.
“Of course, the lag in the sales process means we may not see significant falls for a while, and the annual figure may remain positive for months. But it’s increasingly difficult to look ahead and not see a housing market correction as we go into 2023.”
Iain McKenzie, CEO of The Guild of Property Professionals:
“House prices are now starting to simmer down, but the effect is less dramatic than might be expected considering the economic upheaval of the last few months.
“Much of the chaos from the mini-Budget has been successfully navigated by the new Chancellor, but it’s clear that sentiment has shifted from the optimistic mood seen during the early summer.
“With recession on the horizon, all eyes will be on how the jobs market holds up, which will determine how the property market weathers the storm over the coming months and years.
“We are still seeing the demand for good quality housing among first-time buyers, but reduced mortgage availability and rising interest rates may cause some to sit on their deposit until the market stabilises.
“Rental prices are still climbing for many households, and despite the changes to mortgage affordability, it still makes sense for prospective buyers to try to get their foot on the property ladder.
“Confidence in buying will remain robust if the Government holds firm on delivering the incentives to buy.”
James Briggs, head of personal finance intermediary sales at specialist lender Together:
“As expected, house prices dropped by 0.4% this month – and much of the market will now be preparing for further falls as the country braces itself for a recession.
“The Bank of England’s decision to hike interest rates to 3% – the biggest increase in 33 years – and the continued cost-of-living crisis are both contributing factors to this rise. Whilst a price drop does benefit first-time buyers, increasingly stretched household finances will inevitably impact mortgage affordability and make it increasingly difficult for them to get their foot on the ladder.
“Against this backdrop of economic uncertainty, we expect to see a rise in the number of potential homeowners who fall outside the tight criteria of mainstream banks. But that doesn’t necessarily mean that home ownership will be out of reach. It’s worth speaking to a mortgage broker or specialist lender, who can take a more flexible view on an individuals’ circumstances, to fully assess what options may be open to them.”
Karen Noye, mortgage expert at Quilter:
“This morning’s Halifax house price index for October shows the challenging economic circumstances are beginning to take a real toll on the housing market. For the third time in the past four months house prices dropped, this time by 0.4%. This marks the sharpest fall seen since February 2021 and takes the average house price to a five-month low of £292,598.
“Despite the challenges of the past few years, the housing market has managed to maintain its momentum. However, it looks to have finally met its match as the impact of the mini-budget and the ongoing cost-of-living crisis proved too heavy for prices to continue rising. The pace of annual growth has slowed considerably as a result, up by 8.3% in October compared to 9.8% in September.
“It remains to be seen just how far house prices might drop, but there are several factors that could have an impact. Many are looking to the autumn budget for clarity, and the market reaction could help to reduce inflation in the longer term and put a halt to rising interest rates. However, the number of people facing huge increases in their mortgage payments is growing and could become unmanageable for some.
“One of the few policies left standing from the mini-budget was the cut to stamp duty. If this remains in place as expected, it could lower the size of the house price drop as people may opt to take advantage of the tax saving despite the economic backdrop. However, soaring inflation, rising interest rates and high energy bills are putting a hold on many people’s plans to move.
“Ultimately, costs are rising across the board and as the winter draws in and the real impact of rising energy bills hits, people’s finances will be stretched even further. With mortgage rates rising, many people will need to reconsider moving home and could opt to stay put to ride out the cost-of-living crisis instead, while others will need to move into cheaper properties. As demand falls and the level of stock increases, we will no doubt see a further drop in house prices.”
