UK house prices fell 0.6% in October, the steepest monthly decline in more than three years, as elevated mortgage rates continue to weigh on market activity, according to data from Lloyds Banking Group.
The average property price stood at £296,285 last month, marking the fourth consecutive monthly decline and defying analyst expectations of a 0.1% rise. On an annual basis, prices were down 1.2% compared with October of the previous year, representing the largest year-on-year fall since October 2023.
Mortgage rates dampen buyer activity
The decline comes as borrowing costs remain elevated, with the average two-year fixed mortgage rate at 5.97% and five-year fixed rates at 5.99%, according to Moneyfacts. These figures follow the Bank of England’s recent decision to raise the base rate by a quarter point to 4%, the first increase in three years, in response to inflationary pressures linked to the Middle East conflict.
Andrew Asaam, mortgages director at Lloyds, said housing demand is being tested by challenging economic conditions. “Renewed inflationary pressures, driven in part by the conflict in the Middle East, are keeping borrowing costs high and adding to the squeeze on household finances, making some buyers understandably more cautious,” he stated.
Regional variations persist
London recorded the steepest annual decline, with prices falling 3.1% year-on-year to an average of £524,892. The south-east and south-west of England followed with annual declines of 2.4%, reaching £379,258 and £298,057 respectively. In contrast, Northern Ireland, Scotland and Wales maintained relatively stronger annual growth rates.
Amy Reynolds, head of sales at Richmond estate agency Antony Roberts, noted that buyers remain in the market but are exercising caution. “The people hit hardest are those remortgaging and second-steppers trying to stretch to one more bedroom,” she said.
Market outlook remains subdued
The property portal Rightmove reported a 10% decline in buyer demand and a 9% drop in agreed sales in results covering the four months to 31 October, prompting the company to downgrade its revenue and profit expectations. The platform recorded 6% fewer new homes listed compared with the end of last year, whilst rental inquiry levels increased with prices up 2.9% annually.
Property services firm Savills this week indicated that Britain’s housing market is not expected to recover until 2028, when improvements in economic conditions and mortgage affordability are forecast to support activity. The assessment aligns with recent market observations showing continued pressure on transaction volumes.
The October data suggests the housing market faces continued headwinds as borrowing costs remain elevated and economic uncertainty persists. Market participants will be monitoring mortgage rate movements and buyer sentiment as the year draws to a close.
