UK house prices post biggest fall since October 2008 – business live | Business

The jump in mortgage rates after the mini-budget hit house prices, as Tom Bill, head of UK residential research at Knight Frank explains:

“House prices in November moved sharply in the opposite direction to mortgage rates, which spiked following the mini-Budget.

The slightly confusing message for buyers and sellers is that mortgage rates should continue to edge down even as the Bank of England raises the base rate.

Bank of England data has shown that mortgage approvals fell 10% in October, as the jump in borrowing costs hit demand.

Bill predicts house prices will keep falling:

Even as the financial pain becomes less acute in coming months, we expect it to become more widespread as more favourable mortgage offers made before the mini-Budget lapse.

This should take house prices back to where they were in the summer of 2021, erasing around half of the 20%+ gain they made during the pandemic.”

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UK house prices have tumbled at the fastest rate since October 2008, the height of the financial crisis, as rising mortgage rates made buying a new house less affordable.

Lender Halifax has reported this morning that the average house price dropped by 2.3% in November, the third consecutive fall in a row. This wiped almost £7,000 off the average price, which fell to £285,579 from £292,406.

The annual rate of growth dropped to +4.7%, from +8.2% in October.

Prices fell in almost every region of England (apart from the North East), and also slowed across Northern Ireland, Scotland, and Wales.

The market volatilty following September’s mini-budget rocked the housing market, driving up mortgage rates.

Kim Kinnaird, director at Halifax Mortgages, explains:

While a market slowdown was expected given the known economic headwinds – and following such extensive house price inflation over the last few years (+19% since March 2020) – this month’s fall reflects the worst of the market volatility over recent months.

“Some potential home moves have been paused as homebuyers feel increased pressure on affordability and industry data continues to suggest that many buyers and sellers are taking stock while the market continues to stabilise.

Kinnaird points out that house prices have climbed steeply over the last two years.

“When thinking about the future for house prices, it is important to remember the context of the last few years, when we witnessed some of the biggest house price increases the market has ever seen.

Property prices are up more than £12,000 compared to this time last year, and well above pre-pandemic levels (+£46,403 vs March 2020). “The market may now be going through a process of normalisation. While some important factors like the limited supply of properties for sale will remain, the trajectory of mortgage rates, the robustness of household finances in the face of the rising cost of living, and how the economy – and more specifically the labour market – performs will be key in determining house prices changes in 2023.”

The chancellor Jeremy Hunt is meeting bank chiefs today, and will urge them to do everything in their power to support those struggling to pay their mortgage during the cost-of-living crisis.

Last week, rival building society Nationwide reported that house prices fell 1.4% last month, as rising interest rates hit demand.

Many experts expect prices to fall next year. The independent Office for Budget Responsibility predicts that house prices could fall by as much as 9% by 2024.

A study by Bloomberg Economics has estimated house prices in the UK may fall by as much as 20% as the Bank of England pushes up the costs of borrowing. The BoE has already raised interest rates to 3%, from 0.1% a year ago, with further increases expected.

Also coming up

The London stock market is set to open higher, after China announced a nationwide loosening of Covid restrictions. The change means that asymptomatic Covid-19 cases and those with mild symptoms can self-treat while in quarantine at home, the strongest signal yet that Beijing is shifting its zero-Covid strategy.

MPs on the Treasury committee are holding an evidence session with experts and the Financial Conduct Authority as it continues its inquiry into the crypto-asset industry. They’re examing crypto fan tokens, particularly those endorsed by footballers.

The agenda

• 7am GMT: Halifax house price index for November

• 10am GMT: Eurozone GDP report for Q3 2022 (third estimate)

• Noon GMT: US weekly mortgage applications data

• 2.15pm GMT: Treasury committee hearing into crypto fan tokens

• 3pm GMT: Bank of Canada sets interest rates