The Halifax says house prices were flat in May, but fell 1.0 per cent in a year - the first annual fall recorded by this index since December 2012.
The average property now costs £286,532. This is down £3,000 in a year and £7,500 from the peak in August 2022. However prices are still £25,000 above their level two years ago.
Prices in the south of England have fallen furthest over the year – with the South East down 1.6 per cent and the South West falling 1.4 per cent. New builds and detached houses were the only property types to avoid annual declines. Flats are down 1.9 per cent.
All signs are pointing south for the property market. Prices are down in a year, and although they remained flat in May, this is the first month that the Halifax has measured annual falls.
Unfortunately for sellers, this reflects the weakness that had crept into the market before the impact of higher rates had been passed onto Halifax customers – which is happening today. It means the pain is unlikely to be over yet.
There were some very small rises in mortgage rates at this stage, but nothing to frighten the horses, so it's unlikely to have been mortgage rates driving the fall in house prices in May. Instead, it owes a great deal to the fall in demand.
The Royal Institution of Chartered Surveyors has charted a relentless drop off in demand and agreed sales for months. It was down again in April, which is likely to have fed into lower prices of transactions in May. The Bank of England announced that mortgages approved for house prices in the coming months also dropped over 5.0 per cent in April, which means that even without the hike in mortgage rates we were expecting a seriously sluggish summer.
This is far from over.
Core inflation sent shockwaves through the mortgage market at the end of May, and we’re still feeling the effects as major lenders bump up prices. The market now expects rates to be higher for longer, which means fixed rate mortgage prices are increasing.
Halifax has pushed up rates on its two-and five-year fixed rate deals, which is likely to depress prices even further in the coming months.
The fact that so much of the mortgage market is fixed means this will take some time to feed into the property market – and then some time to feed out again. It’s why Oxford Economics has predicted house prices will continue to fall for longer – to the autumn of 2025, and not recover to 2022 levels until 2028.
On the flip side, it means they’re expecting annual falls to be smaller than in previous downturns, with declines of around 4.3 per cent a year in the last three months of this year, 4.1 per cent by the end of next year, and then a 1.1 per cent drop in 2025.
No forecast is ever guaranteed, but for those who are buying and selling at the moment, the risk that prices could remain weaker for years should factor into your plans. For some people it’s not enough to put them off. Making a decision about where you live comes down to more than just price. It lies at the heart of how you live too, and for some people that means it’s worth paying today’s price, even if it’s worth less for the next five years. If you’re buying somewhere for the long term at a price you can afford, then this isn’t a reason to stop.
However, for anyone overstretching themselves or considering a move somewhere they won’t be happy for the long term, it will give them a reason to pause. Playing the wait and see game is always a risk when you’re buying a property, but for some people right now it will be a risk worth taking.
* Sarah Coles is head of personal finance at consultancy Hargreaves Lansdown *
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The market will recover once buyers have more confidence in stable interest rates moving forward.
Meantime renters should be concerned that Landlords are not growing their wealth through increasing capital growth, so the focus will be purely on revenue growth through higher rents whilst market forces permit this.
Renters are still getting a bargain as they're shielded from falling house prices, negative equity, higher repair bills etc
Once confidence returns to the economy in general then house prices will stabilise. If buyers come back in droves, then prices will go up.
Many buyers whom rent will be incentivised by the impact of high rents and with lenders offering 100% mortgages and 35 year mortgage terms then to me there will be plenty of buyers.
The unknown is when will confidence return!
People can only buy if lenders are willing to lend.
Right now lenders are being unbelievably cautious even on remortgaging.
I've just had a month of trying to remortgage a couple of houses.
We both have perfect credit histories, very high credit scores and no missed payments whatsoever. We were told by one lender our unsecured credit utilisation rate was too high and by another we had adverse credit. We paid for our Checkmyfile credit reports and discovered it was weeks out of date and some stuff had been double counted (balance transfers tend to show on both the old and new lender for a while). It shows 100% of payments have been made on time for the entire 6 year period it covers. What it doesn't show is savings, investments, unencumbered houses, other assets or earnings.
I freely admit I use credit cards for just about everything. Firstly for the Section 75 protection and secondly for the Tesco Clubcard points (which then pay for a significant amount of hotel accommodation when we're on holiday). The card is usually paid off in full at least once a month, sometimes two or three times as the limit isn't always enough. Very occasionally a bit is balance transferred onto a 0% card if I've made a really large purchase (2 sets of solar panels and batteries for example). I'm basically doing exactly what Martin Lewis recommends.
It would seem lenders don't approve of his ideas.
The other thing one of the lenders has been really fixated on is our earned income. We're portfolio landlords so only work because we would be bored if we didn't. It keeps us in touch with reality. I actually do zero hours warehouse work as an alternative to a gym membership. Apparently lenders disapprove of gym memberships but equally they disapprove of a well paid zero hours alternative. You can't win! My husband likes driving big boys toys so works as an agency HGV driver. He will accept the highest paying, most convenient shift on offer. It also has the benefit of 2 goes at the NI free pay so is effectively a 12% pay rise on some of it. All very sensible but thoroughly confuses lenders. As it is only the icing on an already substantial cake their fixation on it is mystifying.
So my plan to increase the borrowing on my non HMO properties to reduce the more expensive borrowing on my HMOs is failing miserably. I thought I was being prudent and responsible. Clearly not traits mortgage lenders are very keen on.
The 3 main groups never to trust or expect fairness or loyalty from are Banks, Credit card Companies and politicians local and national
Well it doesn’t matter what interest rates do without S 21 its not a business.
There was a 2 bed Flat for viewing this morning in Ealing 13 couples turned up, £2’000. pm this is what Government / Shelter / Generation Rent done for Renter’s, clever aren’t they it would be great if they knew what they were blathering about.
I have no confidence whatsoever in the Regulators, expect Recession.
Spot on Michael!
More to come I think, it’s the right thing for the good of those wanting to buy and the wider society.
There’s a new petition to reverse Section 21 on landlords Zone but I had 3 goes to sign and failed keeps telling me to click the link to verify my email, don’t know what they are on about am I to only one stupid technology easier to build the house, no wonder we are in a mess.
Thanks Michael. I've signed it. It is a UK Government and Parliament petition.
The title of the petition is "Reverse provisions in Renters Reform Bill to remove Assured Shorthold Tenancies"
It only has 423 signatures at the moment.
Just look for the relevant email from "Petition UK government and parliament" in your emails and click on the link in that email
Many thanks
Simon it’s not our properties they’ll be buying too expensive it goes to show the good deal my Tenants have.
I believe they can still buy houses with garden and garage at a reasonable price without going too far out of
Town (150 / 200k) keep away from help 2 buy and high rise Blocks of Flats sharks.
Many have been taken in with those Schemes and worse Shared ownership they’ll live to regret it.
Mike - I'm interested in your comments above. Could you expand on what are you referring to by referencing "Blocks of Flats sharks" ?
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