House prices fell 5.3% year-on-year in August, the sharpest fall in 14 years and a much faster drop than expected, in a sign that interest rate hikes are clearly talking their toll on the property sector.
Princes were down 0.8% month-on-month, compared to a 0.4% expected drop. That was much steeper than the gentle declines since in earlier months this year, but still less than the drop following last yea’rs mini-Budget.
James Briggs, Head of Intermediary Sales at Together, said: “Today’s announcement of a fall in house prices is likely to have been, in part, due to buy-to-let (BTL) investors leaving the market, leading to more properties becoming available for first time buyers and home movers, which in turn has eased demand and prices have become marginally more affordable.
“Whilst the Halifax UK affordability report indicates housing is 0.6% more affordable now than a year ago, creating a more favourable environment for both residential and BTL investors, the uncertainty over whether these current figures will be a trend or a brief blip for the market continues.
“Against this backdrop, lenders will continue to compete with each other for prime borrowers with strong affordability; while the specialist lending market will look to support those who fall outside the standard criteria requirements.”
The decline represents an annual fall of around £14,600 on a typical UK home, to an average price of £259,153.
Alice Haine, Personal Finance Analyst at Bestinvest, said: “With the Bank of England likely to push ahead with its 15th interest rate rise at its meeting this month and the potential for more rate rises to come, the outlook for the property market appears gloomy. Mortgage approvals plunged almost 10% in July with net mortgage lending increasing by just £200 million on the previous month. The weaker lending data will inevitably feed through to house prices, exacerbating the dampening effect high interest rates are already having on the property market.”
Mortgage lenders have been slowly but consistently lowering rates in recent months, but they remain at levels that haven’t been seen for 15 years.