Halifax has reported that property prices in August dropped by -4.6% on an annual basis, from -2.5% in July.

This is the biggest year-on-year fall since 2009.

Average house price fell by -1.9% in August, the largest monthly fall since November 2022.

The typical UK home now costs £279,569, down by around £14,000 over the last year, back to the level seen in early 2022. That said, average prices remain around £40,000 above pre-pandemic levels.

Kim Kinnaird, director of Halifax Mortgages, said: “It’s fair to say that house prices have proven more resilient than expected so far this year, despite higher interest rates weighing on buyer demand. However, there is always a lag-effect where rate increases are concerned, and we may now be seeing a greater impact from higher mortgage costs flowing through to house prices. Increased volatility month-to-month is also to be expected when activity levels are lower, though overall the pace of decline remains in line with our outlook for the year as a whole.

“Market activity levels slowed during August, and while there is always a seasonality effect at this time of year, it also isn’t surprising given the pace of mortgage rate increases over June and July. While these did ease last month, rates remain much higher compared to recent years. This may well have prompted prospective buyers to defer transactions in the hope of some stability, and greater clarity on the future direction of rates in the coming months. The market will continue to rebalance until it finds an equilibrium where buyers are comfortable with mortgage costs in a higher range than seen over the previous 15 years.

“We do expect further downward pressure on property prices through to the end of this year and into next, in line with previous forecasts. While any drop won’t be welcomed by current homeowners, it’s important to remember that prices remain some £40,000 (+17%) above pre-pandemic levels. It may also come as some relief to those looking to get onto the property ladder. Income growth has remained strong over recent months, which has seen the house price to income ratio for first-time buyers fall from a peak of 5.8 in June last year to now 5.1. This is the most affordable level since June 2020, and will be partially offsetting the impact of higher mortgage costs.”