October house price drop sharpest for 20 months, says Halifax

UK house prices dropped by 0.4% in October - the sharpest drop since February last year, according to the Halifax. 

This is the third month-on-month decrease in four months, the mortgage lender said, with the annual growth rate dropping from 9.8% in September to 8.3% in October. An average UK property cost £292,598 in October compared to £293,664 the month before. 

The Halifax figures come after the Nationwide last week said house price fell 0.9% in October, also the biggest monthly fall for over a year.

Kim Kinnaird, director of Halifax Mortgages, said a “post-pandemic slowdown was expected” and that the housing market “received a significant shock as a result of the mini-budget, which saw a sudden acceleration in mortgage rate increases”.

She said she believed mortgage rates had now peaked but that the turbulence had “encouraged those with existing mortgages to look at their options, and some would-be homebuyers to take a pause”. She predicted a “much slower period for house prices” with “ tax rises and spending cuts expected in the autumn statement”. 

Average two- and five-year fixed rate mortgage rates recently went above 6%, the highest for 14 years. The Bank of England put the base rate up to 3% on Thursday last week, sparking concern mortgage rates would remain high and that the “era of low interest was over”. 

The Bank also forecast the UK economy will be in recession until well into 2024, which would be the longest recession on record. 

Although, she pointed out that while the house prices had slowed it was “significant” that average property prices had risen more than £22,000 in the past 12 months and by nearly £60,000 (+25.7%) over the last three years. 

Jack Roberts, chief executive of home moving platform SlothMove.com, said the market was cooling and the “only question is how deep the coming correction” will be. “We’re entering an unpredictable period where buyers, particularly first-time buyers, will hold off on purchases, hoping to get better prices once valuations sink further,” Roberts stated. 

Iain McKenzie, chief executive of the Guild of Property Professionals, said the jobs market will now be key to how the property industry fares in the next few months. 

“With recession on the horizon, all eyes will be on how the jobs market holds up, which will determine how the property market weathers the storm over the coming months and years”, he said. 

Kinnaird agreed unemployment would be a “key determinant of house price performance into next year and beyond”. 

“Currently joblessness remains historically low but with growing expectations of the UK entering a recession, unemployment is expected to rise,” she said.