Annual house price growth hits three-year low - Halifax

Halifax has recorded the lowest level of annual house price growth for three years.

Its latest House Price Index for January 2023 showed annual growth slowed from 2.1% in December to 1.9% last month.

Price growth was flat on a monthly basis, according to the report and the average house price is now £281,684.

Kim Kinnaird, director at Halifax Mortgages, said: “The average house price is now around £12,500 below its peak in August last year, though it still remains some £5,000 higher than in January 2022. 

“We expected that the squeeze on household incomes from the rising cost of living and higher interest rates would lead to a slower housing market, particularly compared to the rapid growth of recent years. 

As we move through 2023, that trend is likely to continue as higher borrowing costs lead to reduced demand. 

“For those looking to get on or up the housing ladder, confidence may improve beyond the near-term. Lower house prices and the potential for interest rates to peak below the level being anticipated last year should lead to an improvement in home buying affordability over time.”

Commenting on the figures, Karen Noye, mortgage expert at wealth manager Quilter, said: “House prices in January have remained stable after a few months of falling according to Halifax this morning. This may be because mortgage interest rates have gradually started to climb down from their peak following Liz Truss’ infamous mini-Budget, which caused potential buyers to leave the market in their droves.

“While we are still far from out of the woods, with the Bank of England still likely to raise rates again to curb inflation, we feel in a more predictable time. Predictability helps to drive demand up in the housing market but that is weighed against severe personal financial strain. Therefore a stagnating or slowly dropping housing market is to be expected for the time being.”

She said this more “forecastable environment” is illustrated by the fact that many lenders still cut pricing last week even when the Bank of England raised interest rates.

Tom Bill, head of UK residential research at Knight Frank, added: “The poor performance of the UK housing market in the chaotic final months of last year is not a useful barometer for 2023. 

“Activity has been strong in the first five weeks of this year as buyers and sellers reactivate plans and come to terms with the fact that fixed-rate mortgages are now in line with their long-run average. 

“Some discretionary demand has disappeared but most buyers need to move and have accepted the fact that a 13-year period of ultra-low rates is over.

“As budgets adjust to higher rates, we think prices will fall by 5% this year but offers are still exceeding the asking price in some areas. Unemployment remains low and inflation appears to have peaked, so you wouldn’t rule out the housing market surprising on the upside as it did during the pandemic.”