House price growth slows to lowest level in three years – and more pain is to come
House price growth has slowed to the lowest level in three years, according to mortgage lender Halifax.
The pace of annual growth slowed to 1.9pc, down from 2.1pc in the year to December.
Monthly price falls have started to plateau, following four months of consecutive drops. The average house price was £281,684 in January, down just 0.01pc from £281,713 in December.
This followed sharper monthly falls at the end of last year, with prices dropping by 2.4pc in November and 1.3pc in December.
Analysts said the scale of house price falls had slowed at the start of the year, but that further drops throughout 2023 were still to be expected. The average house price is now 4.2pc below its peak in August.
Kim Kinnard, of Halifax, said the squeeze on household incomes from the rising cost of living and higher interest rates had led to the slowdown, particularly compared with the rapid growth of recent years.
“As we move through 2023, that trend is likely to continue as higher borrowing costs lead to reduced demand,” she said.
While prices across the country remained flat on average, in certain areas drops continued.
The sharpest monthly fall was in the East Midlands, where prices fell 2.9pc, from £241,850 in December to £234,946 in January.
This was followed by London, where prices fell 2pc to £530,396 in January. The annual rate of price growth in the city is now at 0pc, the lowest of any region.
Northern Ireland was the only region to record a very small monthly increase from £183,825 in December to £183,935 in January.
In the West Midlands, house prices dipped by just 0.9pc, from £250,965 in December to £248,625 in January.
Tom Bill, of Knight Frank estate agents, said prices were expected to fall this year, but said offers on homes were still exceeding asking prices in some areas.
Mr Bill said buyers and sellers returning to the market had accepted that a 13-year period of ultra low interest rates had come to an end.
He said falling borrowing costs and relative stability in the economy should help to rule out a 2008-style crash.
The average rate on fixed-term mortgages peaked above 6pc in October, but is expected to dip below 5pc in the coming weeks as lenders attempt to undercut one another with ever cheaper deals.
Mr Bill said: “Unemployment remains low and inflation appears to have peaked, so you wouldn’t rule out the housing market surprising on the upside as it did during the pandemic.”
The average two-year fixed mortgage rate was 5.43pc yesterday, while the average five-year deal was at 5.15pc, according to the analyst Moneyfacts.
Last week’s interest rate rise pushed up to the cost of tracker mortgages from 4.39pc to 4.74pc.