House prices fall at their fastest rate in 14 years

House prices fell at their fastest annual rate in 14 years in August, according to the Halifax, as rising mortgage rates affected the market.

House prices continue to fall at their fastest rate in years, with Nationwide reporting a 5.3% fall this August, and Halifax saying they were 4.6% lower. This equates to a fall of over £14,000 in the average asking price of a house. Mortgage lenders are predicting further falls through the rest of the year, with prices having dropped by 1.9% between July and August alone.

The fall in prices is likely due to the impact of increased mortgage costs leading to a downturn in demand and therefore a drop in house prices. It's expected to continue until the market finds its natural "equilibrium" where buyers are comfortable with mortgage costs in a higher range than seen in previous years.

Since December 2021, the Bank of England has raised interest rates 14 times in a row in a bid to halt rising consumer prices. The bank's base rate now stands at 5.25%, although financial markets are expecting another increase to 5.5% this month and then yet another rise thereafter.

The average home now costs £279,560 in the UK according to the Halifax, the UK's biggest mortgage lender. Its figures only take into account buyers with mortgages and do not include those who purchase homes with cash or buy-to-let mortgages. And according to the latest official data, cash buyers account for over a third of housing sales.

Although mortgage rates are no longer rising, they remain much higher than many borrowers are accustomed to, leading to potential buyers delaying house purchases. The average rate on a two-year fixed rate mortgage is 6.67%, according to the financial information service Moneyfacts. The typical five-year deal has a rate of 6.16%.

Property prices have fallen in every part of the UK, with the biggest drop in London, although it remains the most expensive place to buy in the UK.

With house prices set to continue to fall and uncertainty over mortgage rates, landlords are advised to hang onto their rental properties. With demand for rental properties from tenants currently outstripping the supply and tenants more accepting of rent increases, retaining your investment is more desirable than divesting at present.

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