House prices fall for fourth consecutive month, says Halifax – best time for first-time buyers to get a bargain in 2023

HOUSE prices have fallen for the fourth month in a row – and were down by 1.5% in December.

It follows a 2.4% drop in November, a 0.4% decrease in October and a 0.1% dip in September, according to Halifax’s house price index.

It means the average UK house price was £281,272 in December, down from £285,579 in the previous month.

The bank’s index also showed the annual rate of house price growth more than halved, to 2% in December, from 4.6% in November.

The property market has experienced a tumultuous last few months, particularly following the government’s disastrous mini-budget.

It caused mortgage rates to shoot up to a 14-year high in September, although they have since fallen.

Figures from Moneyfacts show the average two-year fixed-rate mortgage was at 5.82% in December.

It means people are holding off from buying homes which in turn has led to house prices falling.

But they still remain higher compared to last year, as the Bank of England has hiked rates to tackle high inflation.

Rising rates and the cost of living crisis have meant fewer people are looking to buy a home or move home – badly impacting the housing market.

Higher energy bills and food prices are also squeezing incomes making it harder to get a home loan.

Kim Kinnaird, director of Halifax Mortgages, said: “As we’ve seen over the past few months, uncertainties about the extent to which cost of living increases will impact household bills, alongside rising interest rates, is leading to an overall slowing of the market.

“The housing market was a mixed picture in 2022. We saw rapid house price growth during the first six months, followed by a plateau in the summer before prices began to fall from September.”

She added that the average home remains high – greater than it was at the start of 2022 and over 11% more than house prices at the beginning of 2021.

Halifax’s index is just one measure of house prices, although others have said house prices are falling or are expected to fall.

Nationwide said they dropped 0.1% between November and December.

Meanwhile, Rightmove said the average home price fell by almost £8,000 in December compared to November – a 2.1% month-on-month drop.

Lloyds Bank has predicted house prices could fall by as much as 8% this year.

Halifax said house price annual growth slowed in all parts of the UK, with the North East seeing the greatest slowdown.

It added that Eastern England, West Midlands and Wales experienced the smallest falls in growth rate.

Samuel Mather-Holgate of Swindon-based advisory firm, Mather & Murray Financial has explained what the data means for first-time buyers.

He said that people will be in no rush to buy properties at the top of the mountain in the New Year.

There’s plenty of room for prices to fall and he expects “little activity” in the market until prices settle and that won’t be until late Spring.

Mr Mather-Holgate said: “For buyers who are willing to wait until then, this will be the time to bag a bargain.

“There will be a lot of distressed sellers needing to offload their properties as they cannot cope with the cost of living.

“I expect interest rates may have peaked by then.”

It comes after house prices generally shot up in the last two years after the government introduced a stamp duty holiday and people looked for more space outside of cities.

This means that while some – such as new builds and first-time buyers are at risk of negative equity – many will have enjoyed glorious gains over the past few years.

Negative equity means your house is worth less than the mortgage you owe, making it difficult to remortgage at a favourable rate.

Alice Haine, personal finance analyst at investment platform Bestinvest, said: “While the high mortgage rates seen in October have now eased and property prices are on the decline… affordability is still a challenge for many as prices are still above pre-pandemic levels and household finances continue to grapple with the wider cost of living crisis.”

Here are average house prices across the UK and the annual increases, according to Halifax.

• East Midlands, £241,850, 6.7%
• Eastern England, £337,215, 5.5%
• London, £541,239, 2.9%
• North East, £169,980, 6.5%
• North West, £226,549, 7.2%
• Northern Ireland, £183,825, 7.1%
• Scotland, £200,166, 3.5%
• South East, £395,103, 5.8%
• South West, £304,896, 6.0%
• Wales, £217,547, 6.1%
• West Midlands, £250,965, 7.3%
• Yorkshire and Humber, £205,466, 6.6%

What will happen to house prices in the coming months?

We asked property expert Nicholas Mendes from broker firm John Charcol what he thinks will happen over the next year.

Mr Mendes said house prices are expected to take a dip across the UK as mortgage rate uncertainty continues, making people more reluctant to sell or buy.

He said: “With sellers now looking for a quick sale, while property prices are expected to reduce in the months ahead, there seems to be going confidence that buyers can now negotiate with the seller to get a better deal.

“This is rather than meeting the asking price, or miss losing out to other buyers, as has been the case.

“The uncertainty will naturally be at the forefront of people’s minds and, as a result, we will not see the same level of properties coming on to the market.”

The drop in house prices is good news for first-time buyers wanting to get onto the ladder, but with mortgage rates higher than before it might be harder to get approved for one.

Most people will see a drop in the value of their home, raising fears of households falling into negative equity.

But because prices have gone up so much in recent years, this probably won’t be the case.

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