Stay up to date with notifications from The Independent

Notifications can be managed in browser preferences.

Mapped: House prices fall at fastest annual rate in 12 years as mortgage rates soar

Annual drop of 2.6% in June is largest year-on-year decrease since June 2011, Halifax said

Vicky Shaw,Archie Mitchell
Friday 07 July 2023 11:08 BST
House prices fell at the fastest annual rate seen in 12 years in June, according to Halifax (Gareth Fuller/PA)
House prices fell at the fastest annual rate seen in 12 years in June, according to Halifax (Gareth Fuller/PA) (PA Archive)

House prices fell at the fastest annual rate seen in 12 years in June, according to Britain’s biggest mortgage lender.

Halifax said the average price fell by 2.6 per cent compared with last year, wiping around £7,500 off the average UK property, the biggest drop since 2011.

On a month-to-month basis, property values dipped for the third month in a row, with an average fall of 0.1 per cent in June.

It means the average property in the UK now costs £285,932, Halifax said.

The latest fall comes as soaring mortgage rates, driven by a series of interest rate hikes by the Bank of England to curb inflation, send jitters through the housing market.

Halifax mortgage director Kim Kinnaird said buyers faced a “big jump” in mortgage rates in the last month, which will act as a “brake on demand”.

Ms Kinnaird said: “Concerns about persistent inflation have led to a significant increase in the cost of funding. Coupled with base rate rising by another 50bp, this contributed to a big jump in typical mortgage rates over the last month.”

The latest figures from experts Moneyfacts show an average two-year fixed residential mortgage rate today is 6.54 per cent. This is up from an average rate of 6.52 per cent on Thursday.

Homeowners have been warned that fixed-rate deals could soar to 7 per cent this summer as interests continue climbing.

Leading economist Allan Monks, of JP Morgan, said some indicators suggested the Bank of England’s key rate would have to rise a further 2 percentage points to 7 per cent to curb inflation as prices continued to climb.

And the Bank of England has been warned pushing interest rates to 7 per cent could send shock waves through Britain’s housing market and average prices tumbling.

But despite fears around the housing market, house prices are still up by 1.5 per cent, or around £4,000, so far this year.

Ms Kinnaird said: “These latest figures do suggest a degree of stability in the face of economic uncertainty, and the volume of mortgage applications held up well throughout June, particularly from first-time buyers.

“That said, the housing market remains sensitive to volatility in borrowing costs.”

Asked about the house price figures, government minister Robert Halfon said Britain faces a “very difficult economic situation”.

“It is going to be tough for some people,” he told the BBC.

But Mr Halfon said falling house prices will be “better for those people who want to buy houses”.

“But it will be tough, but there’s no denying that the economic situation is incredibly challenging, there’s a cost of living challenge as well,” he said.

Ms Kinnaird said Jeremy Hunt’s mortgage charter, an agreement with Britain’s biggest banks to protect homeowners, was providing “important reassurance” to borrowers.

With markets now forecasting a peak in bank rate of over 6%, the likelihood is that mortgage rates will remain higher for longer, and the squeeze on household finances will continue to put downward pressure on house prices over the coming year

Kim Kinnaird, Halifax Mortgages

She said: “Extended terms, affordable repayment plans and alternative fixed-rate deals are among the choices for existing borrowers seeking to mitigate the impact of higher interest rates.”

She added: “With markets now forecasting a peak in bank rate of over 6 per cent, the likelihood is that mortgage rates will remain higher for longer, and the squeeze on household finances will continue to put downward pressure on house prices over the coming year.”

Alice Haine, personal finance analyst at investment platform Bestinvest, said: “These are worrying times for first-time buyers whose carefully saved deposit may no longer be enough to secure the home they want.

“Some borrowers may consider radical solutions such as longer mortgage terms, 100 per cent mortgages and downgrading the size and location of the property they purchase to ensure they can afford repayments.

“For others, rapidly rising borrowing costs may feel too alarming, encouraging them to shelve buying plans altogether or hold out until property prices fall further.”

it seems clear that some sellers are seeing a greater choice of properties to buy

Mark Manning, Northern Estate Agencies Group

Mark Manning, MD of Northern Estate Agencies Group, which has branches across Yorkshire, Lancashire and North Derbyshire said: “One of the big trends we observed In June was the growth in the number of properties coming to market… it seems clear that some sellers are seeing a greater choice of properties to buy which contributes to their decision to move.”

He added: “The result of this is a much more balanced market in terms of supply and demand, and this shift could lead to price adjustments in certain areas.”

Jeremy Leaf, a north London estate agent said: “On the ground, sales are still proceeding often to those who are not dependent on mortgage finance but they are taking longer and often involve protracted renegotiations, resulting in modest, rather than large, price falls.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “As mortgage rates continue to rise, there is growing appetite from borrowers for shorter-term fixes and penalty-free trackers in the hope that this volatility in the market will be relatively short-lived.”

Nicky Stevenson, managing director at estate agent group Fine & Country said: “Buyer interest remains broadly on a par with 2019, which was a fairly typical year for the property market compared to the frenzy that followed, and demand continues to outpace supply in many places.

“The homes attracting the most interest and offers are those that look reasonably priced and take account of reduced household buying power.”

Alex Lyle, director of London-based estate agency Antony Roberts, said: “Those buyers who have been looking for an excuse to delay their purchase and wait until we have a clearer understanding of where rates are headed, are now doing so.

“Some vendors are taking a similar approach, sitting tight and waiting until the autumn in the hope that things will have settled down by then.”

There was a noticeable switch from new purchases to clients wanting to remortgage

Lewis Shaw, Shaw Financial Services

John Choong, market and equity analyst at InvestingReviews.co.uk: “With the average fixed mortgage rate now firmly above 6 per cent, the housing market should brace for an onslaught. This is especially the case in the South of England, which is under the most pressure.”

Kate Allen, founder of Devon-based lettings company, Finest Stays, said: “Asking prices for good properties in prime locations remain firm but overall it’s without doubt a buyers’ market now.”

Lewis Shaw, founder of Mansfield-based Shaw Financial Services, said: “June was a busier month than we anticipated. However, there was a noticeable switch from new purchases to clients wanting to remortgage and many looking to consolidate debts.”

Iain McKenzie, CEO of the Guild of Property Professionals, said: “New-build properties popular among first-time buyers are in particularly high demand at the moment.”

Matt Thompson, head of sales at London-based estate agent Chestertons, said: “We are seeing more cash buyers but also house hunters who rather buy now before facing another potential hike in interest rates.”

Chris Druce, senior research analyst at estate agent Knight Frank, said: “While deals continue to be struck, buyers remain nervous and extremely price sensitive. This won’t change materially until we have surety about how high borrowing costs will go.”

Here are average house prices across the UK and the annual increase or decrease, according to Halifax. This breakdown is based on the most recent three months of approved mortgage transaction data:

– East Midlands, £333,343, minus 2.1%

– Eastern England, £238,755, minus 1.1%

– London, £533,057, minus 2.6%

– North East, £186,856, 0.2%

– North West, £168,240, minus 0.9%

– Northern Ireland, £223,493, minus 0.4%

– Scotland, £201,774, minus 0.1%

– South East, £384,106, minus 3.0%

– South West, £301,248, minus 2.1%

– Wales, £215,183, minus 1.8%

– West Midlands, £251,139, 1.5%

– Yorkshire and the Humber, £203,674, 0.2%

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in