Halifax: House prices drop on a monthly basis for first time since September 2023

Average house prices fell on a monthly basis for the first time since September 2023 during March as higher mortgage rates weighed on the property market, Halifax data suggests.

The latest Halifax House Price Index showed average values dropped by 1% in March, while annual growth slowed from 1.6% to 0.3%.
This put average prices for the month at £288,430.

Kim Kinnaird, director at Halifax Mortgages, said: “That a monthly fall should occur following five consecutive months of growth is not entirely unexpected, particularly in view of the reset the market has been going through since interest rates began to rise sharply in 2022. Despite this house prices have shown surprising resilience in the face of significantly higher borrowing costs.

“Affordability constraints continue to be a challenge for prospective buyers, while existing homeowners on cheaper fixed-term deals are yet to feel the full effect of higher interest rates. This means the housing market is still to fully adjust, with sellers likely to be pricing their properties accordingly.

“Financial markets have also become less optimistic about the degree and timing of base rate cuts, as core inflation proves stickier than generally expected. This has stalled the decline in mortgage rates that had helped to drive market activity around the turn of the year.”

Kinnaird said the broader picture is that house prices are up year-on-year, reflecting the opposing forces of an easing cost of living squeeze – now that pay growth is outpacing general inflation – and relatively high interest rates. 

She added: “Taking a slightly longer-term view, prices haven’t changed much over the past couple of years, moving in a narrow range since the spring of 2022, and are still almost £50,000 above pre-pandemic levels.

“Looking ahead, that trend is likely to continue. Underlying demand is positive, as greater numbers of people buy homes, demonstrated by recent rises in mortgage approvals across the industry and underpinned by a strong labour market. And with rental costs rising at record rates, home ownership continues to be an attractive option for those who can make the sums work.
“However, the housing market remains sensitive to the scale and pace of interest rate changes, and with only a modest improvement in affordability on the horizon, this will likely limit the scope for significant house price increases this year.”

Commenting on the index, Iain McKenzie, chief executive of The Guild of Property Professionals, said: “News that house prices may be slowing contradicts the current heightened sense of activity in the market, but other lenders such as Nationwide are also seeing the same trend.

“The property market is still in recovery, and we are likely to see ebbs and flows through the year as buyers navigate challenging living costs.

"The healthy level of mortgage approvals is a far cry from the position at the start of last year, and it is encouraging to see that buyers are finding it easier to get lenders on their side. 

“We anticipate that the coming months will see demand increase further still. Buyers typically prefer to move during the warmer months, and in turn this will increase competition and bolster house prices.

“Owning their own home is an attractive aspiration for many potential buyers as rental prices reach record highs. Those that are in a position to buy will be greeted with a wider variety of homes for sale than there were just six months ago.”

Tom Bill, head of UK residential research at Knight Frank, added: “Since November, 10 weeks of recovery in the UK housing market have been followed by ten weeks of drift.

“Mixed signals around inflation, rising supply and a wave of people rolling off sub-2% fixed-rate mortgages agreed in early 2022 mean the direction of travel for the property market is currently sideways. Once a rate cut appears firmly on the horizon and more mortgage rates start with a 3, we expect stronger demand to push UK prices 3% higher this year.”

Nathan Emerson, chief executive of Propertymark,said: “Spring tends to be one of the busiest times of the year for the housing market, and with inflation falling and interest rates remaining static, homebuyers have adjusted to the latest market conditions. 

“This should result in a surge of new buyers, sellers, and properties coming to the market as the year progresses. This was reflected in Propertymark’s latest Housing Insight Report, which found that there has been an 18 per cent increase in the number of new properties coming to the market. 

“However if inflation continues to drop to pre-pandemic levels, Propertymark is hopeful that interest rates will also start to fall, and the whirlwind of economic turbulence will finally settle for everyone once again.”