House prices fall at fastest rate in 12 years as mortgage mayhem hits

House prices are falling at their fastest pace in 12 years, with an average fall of £7,500 over the past year, Halifax, Britain’s largest mortgage lender, revealed today.

The bank’s long-term index shows that average house prices fell by 2.6 percent over the past year as rising mortgage rates take their toll on the housing market.

Adjusted for the current official UK CPI inflation rate of 8.7%, property values ​​have fallen by 11.3% in real terms over the past 12 months.

But Halifax said the market proved to be more resilient than many would expect, with only a slight monthly drop of 0.1 per cent in May, taking the median house price to £285,932.

Kim Kinnaird, chief executive of Halifax Mortgages, said: ‘The 2.6 per cent annual decline (-£7,500) is the largest year-on-year decline since June 2011.

With very little movement in house prices in recent months, this rate of decline largely reflects the impact of historically high house prices last summer – annual growth peaked at 12.5 percent in June 2022 – supported by the temporary cut in stamp duty.

The year-on-year growth rate also masks some of the fluctuations we’ve seen in the market over the past 12 months.

Average house prices are up 1.5 per cent (£4,000) so far this year, with most of that growth coming in the first quarter, following the sharp fall in prices we saw late last year in the aftermath of the mini -budget.

“These latest figures suggest a degree of stability in the face of economic uncertainty, and mortgage applications held up well in June, especially from first-time buyers.”

But the full effect of the recent chaos in the mortgage market, which has seen rates rise over the past six weeks, is not yet visible in the real estate market.

The rapid rise in mortgage rates has pushed the two-year average fixed rate to nearly 6.5 percent and the five-year average fixed rate to above 6 percent.

Higher rates affect buyers’ ability to borrow and will limit what they can pay for real estate, potentially driving home prices down.

> Why are mortgage rates rising so fast?

Kinnaird added: “The housing market remains sensitive to volatility in borrowing costs. Concerns about continued inflation have led to a sharp rise in borrowing costs.

Combined with a further 50 basis points increase in base rates, this contributed to a large increase in average mortgage rates over the past month.

“The resulting pressure on affordability will inevitably act as a drag on demand as buyers consider what they can realistically afford to offer.

“While there is always a lag effect when rates rise, many existing mortgage holders with variable deals or fixed rate rolling are likely to face an increase in the coming year.”

Where are house prices falling the fastest?

Halifax revealed where house prices are still rising and where they are falling the fastest, with the largest drop in the Southeast

Although prices are falling at an annual rate of 2.6 per cent when looking at the UK as a whole, prices vary from region to region.

For example, prices fell the most in the south of England over the year – with the south-east falling by 3 per cent a year and London by 2.6 per cent a year.

Alex Lyle, director of London-based estate agency Antony Roberts, says: ‘There is a noticeable shift in pricing from a year ago as buyer demand is not the same and the balance of power has shifted more towards buyers . happy to buy.

“The buyers who were looking for an excuse to postpone their purchase and wait until we better understand where prices are heading are doing so now.

“Some sellers are taking a similar approach, sitting still and waiting until the fall in the hope that things will stabilize.”

Meanwhile, in some regions of the UK, prices have remained more or less flat compared to a year ago.

Scotland is down just 0.1 percent a year, while North East England and Yorkshire and the Humber are up 0.2 percent.

The West Midlands have bucked the trend even more, with average house prices in the region rising at an annual rate of 1.5%.