House prices were down 1% in March compared to February, according to Halifax’s latest House Price Index, the first time they’ve fallen for six months.
The bank said that the price of an average property in the UK dropped by £2,908 last month, to £288,430. However, even though property prices dipped on a monthly basis, they were up 0.3% annually in March, compared to 1.6% last month. Over the quarter, property prices grew by 2%. Nationwide similarly reported this week that the average price of a UK property fell 0.2% from February to March
.Kim Kinnaird, director at Halifax Mortgages, said: “That a monthly fall should occur following five consecutive months of growth is not entirely unexpected particularly in view of the reset the market has been going through since interest rates began to rise sharply in 2022. Despite this house prices have shown surprising resilience in the face of significantly higher borrowing costs.
“Affordability constraints continue to be a challenge for prospective buyers, while existing homeowners on cheaper fixed-term deals are yet to feel the full effect of higher interest rates. This means the housing market is still to fully adjust, with sellers likely to be pricing their properties accordingly.”
Falling mortgage rates stall
Despite previous predictions that the Bank of England was likely to cut rates in the Spring, commentators now expect the base rate to remain at 5.25% until at least June or August in a bid to drive inflation down further. This has led to a slowdown in mortgage rate reductions from lender that helped boost the property market earlier in the year.
However, more positively pay growth is now outpacing general inflation and property prices have seen relatively little movement over the past year, although they remain around £50,000 higher than pre-pandemic levels.
Ms Kinnaird said: “Underlying demand is positive, as greater numbers of people buy homes, demonstrated by recent rises in mortgage approvals across the industry and underpinned by a strong labour market. And with rental costs rising at record rates, home ownership continues to be an attractive option for those who can make the sums work.
“However, the housing market remains sensitive to the scale and pace of interest rate changes, and with only a modest improvement in affordability on the horizon, this will likely limit the scope for significant house price increases this year.”
