Halifax records first year-on-year price drop for over a decade

House prices in May fell 1% below the value seen in the same month last year according to the latest data from the Halifax, the first time the mortgage lender has recorded year-on-year price falls since 2012.

The lender said the data, which came after average prices edged down by a fraction – just £130 – month-on-month, showed that the brief spring upturn seen in February and March had now faded “as expected”, with higher interest rates feeding through to household budgets.

The average price of a home, Halifax said, reached £286,532 in May, around 7,500 below the peak seen in August last year, and £3,000 below the price in June 2022.

This marks the first time Halifax has seen a year-on-year drop in prices in the current downturn, with the lender having thus far reported a stronger house price performance than its rival Nationwide, which has been reporting a year-on-year reduction in prices since March, and last week said prices were already 3.4% below the level of a year ago. Halifax actually reported price growth of 1.2% and 0.8% month-on-month in February and March respectively.

Kim Kinnaird, director at Halifax Mortgages, said: “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.”

He added that the return of interest rate rises prompted by stubbornly high inflation was likely to have a further negative effect on the housing 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,” he said. “Therefore further downward pressure on house prices is still expected.”

The figures follow two weeks in which more than 500 mortgage products have been pulled from the market, according to the latest data from Moneyfacts.co.uk, with the cost of fixed rate deals rising sharply.

The mortgage lender said that despite the drop in prices overall, values of new build properties were still rising year-on-year, by 2.8%, albeit at the lowest level for three years. Price falls were widespread across southern England, led by the South east, South west and Greater London. Other areas of the UK recorded low single digit annual price inflation.

Kim McGinley, director at Solent-based Vibe Specialist Finance, said the market was seeing a “correction rather than a crash”. He said: “After the mini-Budget, confidence in the property market fell sharply but during the spring sentiment steadily improved as mortgage rates came down and the economic outlook felt less bleak. Despite the upheaval in the mortgage market over the past fortnight, people have accepted the new rate environment and are getting on with their lives.”