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UK house prices fall for first time since 2012

house prices A sunset view of houses on a London street
Across the UK, house prices fell by 1% in May. Photo: Getty (Karl Hendon via Getty Images)

House prices have fallen year-on-year for the first time since 2012 in May as prospective buyers are hit by higher mortgage rates.

Property prices were down by 1% last month compared with May 2022, the first annual fall in 11 years, according to mortgage lender Halifax.

Monthly prices were flat in May following a 0.4% fall in April, making the average home worth £286,532.

Read more: UK mortgage approvals slump after interest rate hikes

House prices in the south of England remain under the greatest pressure, while detached properties continue to post modest house price growth.

House prices in the South East were down 1.6% to an average price £385,943. It was closely followed by the South West, down 1.4% to £301,079.

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In Greater London prices are down over the last year by 1.2% to an average price £536,622.

The West Midlands remains the best performing region, with house prices rising 2.7% to an average of £251,137.

In Wales, growth was unchanged at 1.1%, with the average property price sitting at £218,365.

Kim Kinnaird, director at Halifax Mortgages, said: “Property prices have now fallen by about £3,000 over the last 12 months and are down around £7,500 from the peak in August. But prices are still £5,000 up since the end of last year, and £25,000 above the level of two years ago.”

Read more: UK house prices fall as interest rate rises set to push mortgages higher

The latest data comes as mortgage lenders, including Halifax, ramp up their mortgage rates.

Halifax Intermediaries has told brokers that it is upping fixed rates today, which are expected to increase by 0.82 percentage points. Meanwhile TSB has said it is hiking rates by up to 0.75%.

The most recent increases come just days after almost 800 residential and buy-to-let mortgage deals were pulled by UK banks and building societies.

Lenders are predicting further rises in the Bank of England's base rate, owing to general price rises – as measured by inflation – staying higher for longer than previously anticipated.

Kinnaird added: “As expected the brief upturn we saw in the housing market in the first quarter of this year has faded, with the impact of higher interest rates gradually feeding through to household budgets, and in particular those with fixed rate mortgage deals coming to an end.”

Rival lender the Nationwide has recorded a deeper fall in house prices, according to its data. It said a week ago that property values were down in the year to May by 3.4%, the biggest decline for 14 years.

Estate agents and mortgage brokers have said the flatlining growth between April and May is a stronger indicator of how the housing market is fairing, rather than the first annual decline in prices since 2012.

Jamie Minors, managing director at Norwich-based estate agents Minors & Brady said: “The fact that growth remained flat in May is a more accurate gauge of the market.

“Clearly the volatility in the mortgage sector at the tail end of the month is likely to have impacted some buyers’ confidence, but they have not headed for the hills.”

Kim McGinley, director at Vibe Specialist Finance, said: “Annual house price growth may be down for the first time in 11 years, but what we are witnessing is a correction rather than a crash.”

Watch: How much money do I need to buy a house?

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