Halifax: Prices fall annually – the first of many?

Halifax House Price Index

House prices fell by 1% in the year to May – and it’s expected for decreases to continue, Halifax’s house price index has revealed.

This is despite quarterly prices actually growing by 1.3%, leaving the average house price at £286,532.

Tom Bill, head of UK residential research at Knight Frank, said: “This is unlikely to be the last national house price index to fall into negative territory this year. Mortgage rates will keep edging up as wage growth keeps core inflation stubbornly high and we expect prices to fall by around 5% this year.

“However, this isn’t the global financial crisis part two for house prices and any decline will be kept in check by rising wages, low unemployment, cash sales, record-high levels of housing equity, longer mortgages and savings amassed during the pandemic. The UK housing market is coming back down to earth after a strong three years, not falling off a cliff.”

Halifax said house prices in the south of England are under the greatest pressure, as they fell by 1.6% in the South East.

Both the Halifax and Nationwide indexes are notable in that they exclude cash purchases.

Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “They do confirm recent trends that tentative market recovery is being threatened by the prospect of more interest rate rises and stubbornly high inflation.

“However, the survey shows prices are still considerably above where they were two years ago so cash and equity-rich buyers in particular are recognising the opportunities.

“Many mortgage holders too will be relieved that their lenders built in a buffer of at least 2 or 3 percentage points at the outset, provided of course their circumstances have not substantially changed.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Lenders continue to increase their mortgage rates, pulling products with little or no notice in response partly to funding costs and in response to what other lenders are doing. This will inevitably impact what buyers can afford and in some cases they may put decisions on hold until the situation improves.

“Swap rates, which underpin the pricing of fixed-rate mortgages, have settled since the inflation news sent them soaring. If this continues, we would expect mortgage pricing to also become less volatile.

“Borrowers coming up to remortgage who are worried about their options should seek advice from a broker and consider reserving a rate for peace of mind. If rates fall before they need it, they could always opt for a cheaper product.”