UK: House prices drop for fourth month

​House prices in the UK have dropped for the fourth month in a row as cost of living pressures and higher borrowing costs dampen demand.

In December, the typical home price dropped to £281,272, according to information from Halifax.

The price drop from November was 1.5%, which was the fastest since the 2008 financial crisis. Prices had already dropped more than 2%.

Cost of living concerns and rising borrowing prices have slowed the market as the Bank of England raised interest rates in a bid to reduce double-digit inflation to its 2% target.

The largest mortgage lender in the UK advised homeowners, whether buying or selling a home, to “be cautious” in 2023 as supply and demand balance out.

This year’s price declines are expected to be 8%, according to Halifax Mortgages.

From December 2021 onwards there was an overall annual increase in house prices. However, the 2% growth is significantly less than the 4% increase seen the month before.

Prices had risen during the pandemic lockdowns and reached a peak of £293,992 in August as buyers sought out larger homes in rural and suburban regions as part of the so-called “race for space.”

Prices have fallen to levels last seen in February and March 2022, undoing the increases from the previous spring and summer.

According to the Bank of England this week, the most recent declines coincide with a drop in mortgage approvals that was at its lowest level since the early epidemic months.

From 57,900 in October to 46,100 in November, there was a decrease of over 10,000 in the number of mortgages approved.

It represents a further decline from the October figures, which plummeted following the market turbulence brought on by the introduction of Liz Truss’s mini-budget in September.

According to a senior personal finance analyst at the financial services firm Hargreaves Lansdown, the impact of the mini-budget mayhem have yet to be completely felt.

“The typical three-month lag between agreeing a sale and completion means this reflects buyer confidence in September, which only included a single week after the mini-budget,” said Sarah Coles.

“A major chunk of these sales were based on mortgages that had already been approved, so the chaos unleashed in the mortgage market by Kwasi Kwarteng’s announcement won’t necessarily have personally affected these buyers.”

“It means this price drop is a product of the gradual easing of enthusiasm for property at the start of the month, and the collapse of confidence in the final week.”

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