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UK house prices will fall 8% in 2023, Halifax predicts

house prices Fall of snow shows different levels of insulation in semi-detached roofs. House on the right has an insulated loft, so heat from house has not melted snow.
Average UK house prices are estimated to fall back to around £258,000. Photo: PA/Alamy

UK house prices are expected to fall by around 8% next year to around £258,000 as higher borrowing costs continue to push up mortgage costs, according to Halifax.

The mortgage lender said house prices flattened off from mid-year, and fell near the end of the year in 2022, with the downward trend set to continue into 2023.

"To put this into perspective, such a fall would place the average property price back at roughly the level it was in April 2021, reversing only some of the gains made during the pandemic," Andrew Asaam, homes director at Halifax, said.

In April 2021, the average house price stood at £258,295. That is £27,000 lower than the current average of £285,579.

Read more: The most stunning properties of 2022

However, Halifax warned that there was still uncertainty around this forecast, with the trajectory for interest rates and unemployment levels key to determining any future changes.

“As the increasing cost of living puts more pressure on household finances and rising interest rates impact customers’ monthly mortgage payments, there’s understandably now more caution among both buyers and sellers ⁠— particularly following recent market volatility ⁠— which has seen demand soften as people take stock,” Asaam added.

First-time buyers have struggled to get on the housing ladder, with the typical UK house price increasing by 71% over the last decade.

A new record high average property price was set in August 2022, hitting £293,992, according to Halifax.

Halifax said the North East of England saw the highest rate of annual property price inflation of any UK region or nation in the year to the end of November, with a rise of 10.5%.

Read more: Bank of England raises interest rates to 3.5% in blow to mortgage owners

The South East of England recorded the biggest price increase, up by £28,068 over the last 12 months to the end of November.

Meanwhile, London recorded the slowest rate of annual house price growth at 5.2% over the last year to the end of November. But at £549,160, the capital still has by far the most expensive average UK property price.

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