House prices in London fell at their fastest rate since the start of the financial crisis last month
(Picture: Shutterstock / GagliardiImages)House prices fell at their fastest rate since the start of the financial crisis last month as the toxic fallout from Kwasi Kwarteng’s disastrous mini-Budget sent the property market plunging.
Latest figures from Britain’s biggest mortgage lender, Halifax, showed that the average cost of a home in Britain dropped 2.3 per cent last month, the third consecutive monthly decline and the biggest since October 2008.
The annual rate of growth halved from 8.2 per cent to 4.7 per cent and is expected to go negative early next year.
The year-on-year growth rate in the rapidly cooling London market also slowed sharply from 6.6 per cent in October to 5.2 per cent and agents warned falls are likely in 2023.
Prices in the capital were rising as fast as 8.6 per cent as recently as August. Kim Kinnaird, director of Halifax mortgages, said: “While a market slowdown was expected given the known economic headwinds — and following such extensive house price inflation over the last few years — this month’s fall reflects the worst of the market volatility over recent months.
“Some potential home moves have been paused as homebuyers feel pressure on affordability and industry data continues to suggest that many buyers and sellers are taking stock while the market continues to stabilise.”
Mortgage rates shot up and hundreds of mortgage deals were withdrawn in October after the former chancellor’s ill-fated “Plan for Growth” almost crashed the gilts market.
Average five-year fixed rates shot up from 4.75 per cent on the day of the mini-Budget to 6.5 per cent by mid-October, according to data from Moneyfacts, meaning homeowners faced huge increases in their costs when they came to remortgage. They are still around the 5.8 per cent mark.
The Halifax figures come just over a week ahead of the next rate decision from the Bank of England on December 15. The Bank is expected to increase its benchmark lending rate by another half a point from three to 3.5 per cent.
London house prices crashed around 16 per cent over the winter of 2008-09 as the world was on the edge of financial Armageddon. However, they bounced back from spring 2009 after the Bank slashed interest rates to a then-record low 0.25 per cent to stimulate the economy and stabilise the property market.
Prices then surged in the era of low borrowing costs and have barely looked back since — with the average now standing at £544,113, according to the Land Registry. However, rapidly rising interest rates and political turmoil slowed down activity in the autumn.
Anthony Codling, chief executive of property platform Twindig, said: “It seems that the house price party is well and truly over... We do not envisage seeing house price falls of the scale seen during the global financial crisis, but the next few months are likely to be choppy until inflation falls and mortgage rates stabilise.”
Oliver Fish, director of Mayfair-based luxury estate agency Oliver James, added: “Amid all the uncertainty, buyers are currently sitting on their hands and adopting a wait and see approach. It’s understandable given the turmoil since the mini-Budget and another interest rate decision due this month. This caution among buyers is forcing sellers, at least those who want to move quickly, to reduce their asking prices in order to secure a sale.
“We predict property prices will fall in the region of two to three per cent in central London over the next 12 months but then expect them to start climbing up again once people have adapted to the higher cost of borrowing.”
