UK house prices fell for the third consecutive month with properties in London and the south east coming under the most pressure.
According to the Halifax House Price Index, the average house price fell by 0.1 per cent from the month before, taking the average price to £285,932. This means that over the last year, house prices have fallen 2.6 per cent overall.
London also saw a fall of 2.6 per cent over the past year, wiping £15,000 off the average property. This was its weakest performance since October 2009 and took the average house price in London to £533,057.
The south of England is the region facing the most “downward pressure”. The south east saw a three per cent fall, its worst performance since July 2011.
The West Midlands actually saw a 1.5 per cent rise while Yorkshire also eked out marginal gains.
What does this mean for you?
Kim Kinnaird, director at Halifax Mortgages, said: “The annual drop of -2.6 per cent(-£7,500) is the largest year-on-year decrease since June 2011. With very little movement in house prices over recent months, this rate of decline largely reflects the impact of historically high house prices last summer”.
The housing market has been hit by rising interest rates. The Bank of England has hiked up rates 13 times in a row, taking the base rate to five per cent.
However, inflation remains stubbornly above target, suggesting that the Bank will have to hike a few more times to bring it back under control.
As Kinnaird noted, “concerns about persistent inflation have led to a significant increase in the cost of funding. Coupled with base rate rising by another 50bp, this contributed to a big jump in typical mortgage rates over the last month.”
The average cost of a two-year fixed mortgage deal increased to 6.52 per cent on Thursday, according to Moneyfacts. An average five-year deal rose above six per cent for the first time this year earlier this month.
Other surveys have indicated the property market is softening in response to tighter credit conditions, but not as much as some economists have predicted.
Nationwide last week said house prices actually rose 0.1 per cent over the last month. Some economists have predicted house prices could drop as much as 10 per cent.
Despite the fall, Matt Thompson, head of sales at Chestertons, said there continued to be interest from buyers as rents have also continued to rise.
“We are seeing more cash buyers but also house hunters who rather buy now before facing another potential hike in interest rates… As tenants are facing rent increases, many are reviewing their situation and conclude that, despite higher interest rates, buying can still present a financially attractive option,” he said.