London house prices were down 4.8% in September, according to Halifax’s House Price Index, as the fear that interest rates will be “higher for longer” continues to take hold.
The UK’s biggest mortgage lender says the average house price across the nation slipped by another 0.4% in the month to £278,601, leaving it 4.7% below September 2022. But the fall was slightly steeper in London, at 4.8%, with the average home costing £525,678. London prices had previously been falling more slowly than the rest of the country.
Halifax Mortgages director Kim Kinnaird said: “Borrowing costs are the primary factor, given the impact of higher interest rates on mortgage affordability. Against this backdrop, homeowners inevitably become more realistic about their target selling price, reflecting what has increasingly become a buyer’s market.”
Higher interest rates have been dragging house prices down in recent months, but the property market has so far avoided a true “crash”, and prices remain above pre-pandemic levels.
Jason Tebb, CEO of property search website OnTheMarket.com, said: “Given all the economic uncertainty it is remarkable how relatively stable the market appears to be as we head into what tends to be a busier period in the run-up to Christmas.”
The Bank of England’s decision to pause its cycle of interest rate hikes last month gave homeowners and prospective buyers some relief, but only a little, as economists still expect interest rates to stay “higher for longer” and keep dragging property values down.
City traders see a roughly 50% chance the Bank of England’s interest rates have already peaked, but they expect rates to stay at 5% or higher until 2025.
Kinnaird said that is “likely to keep mortgage rates elevated in comparison to recent years, constraining buyer demand and putting downward pressure on house prices into next year”.
Alan Davison, personal finance distribution director at mortgage lender Together, said: “House prices may have dipped further, but in truth this won’t completely undo the increases seen over the last four years. And while recent news of falling inflation may also spark hope for first-time buyers and borrowers hunting for cheaper rates; we're not out of the woods just yet.”
