UK house prices rose in October, up by 1.1 percent on a monthly basis, breaking a run of six consecutive monthly falls, according to the Halifax House Price Index.
House prices in October 2023 were 3.2 percent lower than the same month a year earlier.
The typical UK home now costs £281,974, up around £3,000 on the previous month, with South East England seeing the largest annual drop in house prices.
Prices in this area decreased by six percent over the last year, with the average house price now sitting at £374,066.
Kim Kinnaird, director at Halifax Mortgages, said: “Prospective sellers appear to be taking a cautious attitude, leading to a low supply of homes for sale.
“This is likely to have strengthened prices in the short-term, rather than prices being driven by buyer demand, which remains weak overall.
“While many people will have seen their income grow through wage rises, higher interest rates and wider affordability pressures continue to be challenges for buyers.
“Across the medium-term, with financial markets not anticipating a decline in the Bank of England’s Base Rate soon, we expect house prices to fall further overall – with a return to growth from 2025.
“The current picture should continue to be seen in the context of the longer-term house price trend as, on average, prices remain around £40,000 above pre-pandemic levels.”
All UK nations and regions have seen house prices decline on an annual basis.
Scotland’s annual house price was the most resilient, down just -0.2 percent annually, with homes in the nation now costing an average of £202,608.
It was a similar picture in Northern Ireland, with a decline of -0.5 percent, and average house prices of £183,922.
Property prices in Wales fell by -3.9 percent over the year (average house price £213,125). London continues to have the highest average house price in the UK, at £524,057, falling -4.6 percent over the last year.
The latest Bank of England figures show the number of mortgages approved to finance house purchases decreased in September 2023, by 4.7 percent to 43,328. Year-on-year the September figure was 32.5 percent below September 2022.
As the Bank paused interest rates at 5.25 percent for the second time last week, there’s hope for mortgage holders that the tightening cycle may be at or near its peak.
The central bank warned, however, that it would be prepared to hike interest rates again if inflationary pressures returned, such as a spike in energy prices amid renewed conflict in the Middle East, with the takeaway for consumers that borrowing costs are likely to stay higher for longer.
Alice Haine, personal finance Analyst at Bestinvest said: “This will come as a blow for existing homeowners who may have been hoping for hints of a rate cut.
“Those with fixed rate deals expiring in the next few months face significantly higher repayments when they switch to a new deal with many sticking with the same lender to avoid new product fees or fresh affordability checks.
“Locking in a deal up to six months ahead of a product expiring prevents a mortgage reverting to a lender’s ultra-expensive Standard Variable Rate, with the average SVR now 8.19 percent, according to MoneyFacts.
“Even those locked into fixed-rate deals until 2025 or 2026 sitting pretty for now, will be anxiously watching to see when interest rate rises start to come down.
“There are some reasons to be hopeful, however. Inflation is expected to ease further as food and energy prices continue their retreat, while mortgage rates are also improving from their summer highs as lenders make a flurry of rate cuts to attract new business – easing the affordability squeeze for some first-time buyers already buoyed by bumper wage growth and softening house prices. “
