House prices fell again in October falling 0.4%, the steepest drop in value since February 2021

House prices continued to fall in October, falling 0.4 percent compared with a drop of just 0.1 percent seen the previous month, according to the latest Halifax House Price Index.

It’s the third decline in the last four months, meaning the typical UK property now costs £292,598, down £1,066 from £293,664 last month.

Year-on-year prices continue to rise, although the growth rate is slowing.

Drop: House prices fell 0.4% in October, below the 0.1% decline seen in September

Prices rose 8.3 percent in the 12 months through October, down from 9.8 percent in the year through September, the mortgage lender said.

The monthly drop is the steepest drop in prices since February 2021.

Kim Kinnaird, Director of Halifax Mortgages, said: “Although the recent period of rapid house price inflation may now be coming to an end, it is important to maintain this context, with property prices averaging more than of £22,000 in the last 12 months and by almost £60,000 or 25.7 per cent in the last three years, which is significant.

“While a post-pandemic slowdown was expected, there is no question that the housing market took a significant hit as a result of the mini-budget that saw a sudden acceleration in mortgage rate increases.

“While those rates have likely peaked for now, following the rollback of previously announced tax measures, it appears that recent events have encouraged those with existing mortgages to consider their options, and some prospective homebuyers. to take a break.

“It’s understandable that we’ve also seen consumer wariness grow as industry data shows mortgage approvals and loan demand waning.”

Median UK house price is now £292,598 down from £293,664 last month.

Median UK house price is now £292,598 down from £293,664 last month.

Kinnaird added that the combination of the ongoing cost of living crisis and mortgage affordability will continue to affect activity levels.

Also, with tax increases expected in the upcoming fall tax return, “economic headwinds point to a much slower period for home prices.”

Data from the Bank of England has revealed the staggering rise in mortgage rates over the past year.

For a two-year fixed loan at 75 percent LTV, the price increased 4.72 percent, from 1.68 percent in October last year to 6.15 percent last month.

Higher deposit mortgage products have also been affected. A two-year 60% LTV loan has increased 4.8% from 1.13% in October 2021 to 5.93% in the same month this year.

There has also been a sharp rise in mortgage rates since late September of this year, a few days after then-Prime Minister Liz Truss’ ill-fated mini-budget.

On a fixed 86 percent LTV two-year deal, the cost increased 1.76 percent during the month from late September through October. On a £200,000 mortgage, this adds £208 to the monthly payments, bringing them to £1,307.

However, there are still significant factors propping up house prices, as the housing stock remains low and employment is high.

The extent to which a UK recession increases unemployment will likely determine how house prices fare in the coming months.

Tom Bill, head of UK residential research at Knight Frank, said: “There was strong inhalation in the UK property market last month due to the impact of the mini-budget, but that doesn’t mean prices are now steeper. “. downward trajectory.

“We expect mortgage rates to calm in the short term as financial markets respond to the new government, but it is reasonable to assume that house prices have peaked after growing more than 20 percent during the pandemic. .

“After 13 years of ultra-low borrowing costs, anyone buying a home or remortgaging will recognize that the ground has shifted, which is why we expect prices to fall back to the level they were in the summer of 2021.”

Iain McKenzie, CEO of The Guild of Property Professionals, added: “We are still seeing demand for good-quality homes among first-time buyers, but reduced mortgage availability and rising interest rates may cause some to stay in your deposit until the market stabilizes. .

“Rental prices continue to rise for many homes, and despite changes in mortgage affordability, it still makes sense for prospective buyers to try to get their foot on the property ladder.

“Buying confidence will remain strong if the government remains steadfast in providing incentives to buy.”

What to do if you need a mortgage

Borrowers who need to find a mortgage because their current fixed-rate agreement is coming to an end, or because they have agreed to purchase a home, have been urged to act but not panic..

Banks and building societies continue to lend and mortgages are still being offered and applications accepted.

However, rates are changing rapidly and there is no guarantee that the deals will last and not be replaced by mortgages that charge higher rates.

This is the best Money Mortgage Rate Calculator powered by L&C that can show you offers that match the value of your mortgage and property

What if I need to re-mortgage?

Borrowers should shop around and talk to a mortgage broker and be prepared to act to secure a rate.

Anyone with a fixed-rate agreement ending within the next six to nine months should consider how much it would cost to remortgage now and consider closing a new agreement.

Most mortgage deals allow fees to be added to the loan and are then only charged when you withdraw. By doing this, borrowers can lock in a rate without paying expensive setup fees.

What if I am buying a house?

Those with agreed home purchases should also aim to lock in rates as soon as possible, so they know exactly what their monthly payments will be.

Homebuyers should be careful not to overstretch themselves and be prepared for the possibility of house prices falling from their current high levels, due to higher mortgage rates limiting people’s borrowing capacity.

How to Compare Mortgage Costs

The best way to compare mortgage costs and find the deal that’s right for you is to talk to a good broker.

You can use our best mortgage rate calculator to display offers that match your home value, mortgage size, term, and fixed rate needs.

Keep in mind, however, that rates can change quickly, so the advice is if you need a mortgage, compare rates and then speak to a broker as soon as possible, so they can help you find the right mortgage for you. .

> Consult the best fixed-rate mortgages that you could apply for

Some links in this article may be affiliate links. If you click on them, we may earn a small commission. That helps us fund This Is Money and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.