UK house prices are falling for first time in over a year, official statistics show

UK house prices have slipped back in official data for the first time in more than a year as a surge in mortgage rates cools demand in the property market.

The average value of a home fell to £294,329 (€332,079) in December, a 0.4 per cent drop from the previous month, according to the Office for National Statistics. House prices were still up 9.8 per cent on a year earlier but growth cooled for a second straight month.

The figures add to evidence of the toll being taken by higher borrowing costs, with mortgage approvals also sliding to a post-Covid low.

Mortgage rates have eased since the aftermath of former prime minister Liz Truss’s ill-fated tax-cutting plan in September but still remain much higher than before the Bank of England embarked on a string of interest-rate rises more than a year ago.

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“House prices are succumbing to elevated mortgage rates,” said Gabriella Dickens, UK economist at Pantheon Macroeconomics.

“The whack to buyer affordability over the past few months from higher mortgage rates started to weigh more heavily on house prices in December.”

Monthly falls in house prices have already been reported in surveys in recent months. But it was the first monthly tumble in official Land Registry data since October 2021, when the government’s pandemic tax breaks for homebuyers ended.

Forecasters are expecting a fall in house prices in 2023. The average two-year fixed rate home loan soared to a 14-year high of 6.65 per cent in October. It is now below 6 per cent.

Prices are sinking most in the South West and East of England but still rose on a monthly basis in the East Midlands, South East of England and Yorkshire and the Humber. Prices were flat in London.

“We expect prices to continue to contract in the short-term, said Barret Kupelian, economist at PwC. “Some of this effect will be moderated by the strong wage growth, which is a key driver of activity in the market. -- Bloomberg