UK house prices fall for the first time in six months as mortgage costs start to bite

The decline follows five months of month-on-month house price increases.

The average UK house price fell by around £2,900 month-on-month in March, according to Halifax (Anthony Devlin/PA) (PA Archive)

The average UK house price fell by £2,900 in the month of March, according to Halifax, the first monthly drop in six months.

Higher monthly mortgage costs are eating away at affordability as more borrowers are forced off cheap fixed-rate deals and into pricier borrowing. That is leading to house price declines.

Compared to a year ago, prices are now up an anaemic 0.3 per cent to £288,430.

Kim Kinnaird, director of Halifax Mortgages, said the drop comes “since interest rates began to rise sharply in 2022.

“Despite this, house prices have shown surprising resilience in the face of significantly higher borrowing costs.

“Affordability constraints continue to be a challenge for prospective buyers while existing homeowners on cheaper fixed-term deals are yet to feel the full effect of higher interest rates.

“This means the housing market is still to fully adjust, with sellers likely to be pricing their properties accordingly.”

Prices haven’t changed much over the past couple of years, moving in a narrow range since the spring of 2022, and are still almost £50,000 above pre-pandemic levels

Kim Kinnaird, Halifax Mortgages

She continued: “Taking a slightly longer-term view, prices haven’t changed much over the past couple of years, moving in a narrow range since the spring of 2022, and are still almost £50,000 above pre-pandemic levels.

“Looking ahead, that trend is likely to continue. Underlying demand is positive, as greater numbers of people buy homes, demonstrated by recent rises in mortgage approvals across the industry and underpinned by a strong labour market.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “While the flurry of mortgage rate reductions at the start of the year has slowed, pricing is still considerably cheaper than it was a year ago.

“Assuming inflation continues to fall towards its 2% target, the first interest rate reduction could come as early as the summer, which will further boost confidence and activity.”

An increasingly busy property market helped to prop up prices on an annual basis at the beginning of spring, but the monthly fall shows there is still some turbulence

Nicky Stevenson, Fine & Country

Nicky Stevenson, managing director at estate agent group Fine & Country, said: “An increasingly busy property market helped to prop up prices on an annual basis at the beginning of spring, but the monthly fall shows there is still some turbulence.”

Tom Bill, head of UK residential research at estate agent Knight Frank, said: “Since November, 10 weeks of recovery in the UK housing market have been followed by 10 weeks of drift.

“Mixed signals around inflation, rising supply and a wave of people rolling off sub-2% fixed-rate mortgages agreed in early 2022 mean the direction of travel for the property market is currently sideways.

“Once a rate cut appears firmly on the horizon and more mortgage rates start with a three, we expect stronger demand to push UK prices 3% higher this year.”

Andrew Montlake, managing director of Coreco mortgage brokers said: “House prices can be fickle, but after several months of rises it was no surprise that house prices finally fell slightly, reflecting tougher economic conditions and the fact that interest rates have not yet eased significantly.

“Over the past 12 months house prices have however proved to be remarkably resilient, and despite this monthly fall, there is a tidal surge of pent-up demand waiting to break the dam at the first sign that interest rates are finally reducing.”

Martin Beck, chief economic adviser to the EY Item Club, said: “The EY Item Club thinks March’s weakness in values will prove only a temporary interruption to a gradual rebound in property prices.

“Falling inflation and still-strong pay growth mean real wages are rising again, unemployment is very low, consumer sentiment has picked up and quoted mortgage rates are significantly down on the peaks of summer 2023.”

Jason Tebb, president of OnTheMarket, said: “Activity continues to pick up with more inquiries and stock coming to market, as you would expect at this time of year.”

March saw an anticipated slowdown in the housing market prompted by a small increase in mortgage rates at the start of the month. We have already seen this trend beginning to reverse

Sam Mitchell, Purplebricks

Sam Mitchell, chief executive of Purplebricks said: “March saw an anticipated slowdown in the housing market prompted by a small increase in mortgage rates at the start of the month.

“We have already seen this trend beginning to reverse and expect to see improving house prices in the months ahead.”

Nathan Emerson chief executive at property professionals’ body Propertymark said: “Spring tends to be one of the busiest times of the year for the housing market and, with inflation falling and interest rates remaining static, homebuyers have adjusted to the latest market conditions.

“This should result in a surge of new buyers, sellers, and properties coming to the market as the year progresses.”

Iain McKenzie, chief executive of the Guild of Property Professionals, said: “Buyers typically prefer to move during the warmer months, and in turn, this will increase competition and bolster house prices.”

– Here are average house prices and the annual change, according to Halifax. Regional annual change figures are based on the most recent three months of approved mortgage transaction data: 

East Midlands £239,954, 0.1%

Eastern England, £330,627 minus 0.9%

London, £539,917, 0.4%

North East, £172,335, 2.5%

North West, £232,315, 3.7%

Northern Ireland, £194,743, 4.3%

Scotland, £204,835, 2.1%

South East, £385,751, minus 0.7%

South West, £302,033, minus 0.2%

Wales, £219,213, 1.9%

West Midlands, £254,116, 1.8%

Yorkshire and the Humber, £207,232, 1.7%