Halifax has reported that average house prices were largely unchanged in May, remaining flat (0.0% or -£130) following the 0.4% fall in April.
The average UK property now costs £286,532.
That said, the annual rate of growth fell to -1.0%, marking the first time since 2012 that house prices have fallen year-on-year. Halifax says the annual decline largely reflects a comparison with strong house prices this time last year, as the market continued to be buoyant heading into the summer.
Kim Kinnaird, director, Halifax Mortgages, said: “Property prices have now fallen by about £3,000 over the last 12 months and are down around £7,500 from the peak in August. But prices are still £5,000 up since the end of last year, and £25,000 above the level of two years ago.
“As expected the brief upturn we saw in the housing market in the first quarter of this year has faded, with the impact of higher interest rates gradually feeding through to household budgets, and in particular those with fixed rate mortgage deals coming to an end.
“With consumer price inflation remaining stubbornly high, markets are pricing in several more rate rises that would take Base Rate above 5% for the first time since the start of 2008. Those expectations have led fixed mortgage rates to start rising again across the market.
“This will inevitably impact confidence in the housing market as both buyers and sellers adjust their expectations, and latest industry figures for both mortgage approvals and completed transactions show demand is cooling. Therefore further downward pressure on house prices is still expected.
“One continued source of support to house prices is the labour market. While unemployment has recently ticked up from very low levels, brisk wage growth would over time help to improve housing affordability, if sustained.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, added: “Halifax, like the Nationwide figures, exclude cash sales and reflect activity from a few months ago. However, they do confirm recent trends that tentative market recovery is being threatened by the prospect of more interest rate rises and stubbornly high inflation.
“However, the survey shows prices are still considerably above where they were two years ago so cash and equity-rich buyers in particular are recognising the opportunities. Many mortgage holders too will be relieved that their lenders built in a buffer of at least two or three percentage points at the outset, provided of course their circumstances have not substantially changed.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Lenders continue to increase their mortgage rates, pulling products with little or no notice in response partly to funding costs and in response to what other lenders are doing. This will inevitably impact what buyers can afford and in some cases they may put decisions on hold until the situation irmproves.
“Swap rates, which underpin the pricing of fixed-rate mortgages, have settled since the inflation news sent them soaring. If this continues, we would expect mortgage pricing to also become less volatile.
“Borrowers coming up to remortgage who are worried about their options should seek advice from a broker and consider reserving a rate for peace of mind. If rates fall before they need it, they could always opt for a cheaper product.”
