UK house prices will fall by up to 4% next year as high interest rates continue to affect mortgage affordability and sales completions, according to Halifax.
Britain’s biggest mortgage lender said the price of an average UK property would fall by between 2% and 4% but it expected a part-recovery in the market as interest and mortgage rates eased next year.
“Overall, with the combination of cost of living pressures and interest rate levels that are still much higher than even two years ago, we will likely see continued mild downward pressure on house prices,” said Kim Kinnaird, the director of Halifax Mortgages.
A separate forecast by Nationwide was slightly more upbeat about prospects for 2024. The UK’s biggest building society said it expected UK house prices to similarly suffer a “low single digit decline” but added that they could remain “broadly flat”.
Robert Gardner, Nationwide’s chief economist, said: “A rapid rebound in activity or house prices in 2024 appears unlikely.”
Halifax said property prices held up better than expected this year, falling by only 1% to an average of £283,615, but added that this was mostly because of a shortage of homes for sale rather than strong buyer demand.
“To some extent, this masks the fluctuations we’ve seen in the housing market throughout 2023,” Kinnaird said. “As wider economic headwinds began to bite, house prices fell for six consecutive months between April and September, before rising again later in the year as prospects improved.”
Halifax said a lack of competitive mortgage deals meant that approvals fell by a quarter over the past year, while overall sales completions were down a fifth, both the lowest levels seen in at least a decade.
House prices remain 3% down on the peak of £293,025 hit last summer but about £44,000 above pre-pandemic levels.
Halifax said house prices were a “mixed picture” across the UK, with areas such as the south-east of England down 5.7%, while in Northern Ireland they were up 2.3%.
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The lender said that as inflation falls back, and markets price in four quarter-point cuts to the current Bank of England base rate of 5.25% next year, the housing market should show improvement.
The rate of headline UK inflation peaked at 11.1% in October 2022 but fell from 6.7% in September to 4.6% in October.
“Looking ahead, now that inflation is falling back, financial markets are pricing in cuts to base rate during 2024,” Kinnaird said. “Mortgage rates are already falling, with a typical five-year fixed 75% LTV [loan-to-value] deal now below 5%, having been as high as 5.7% as recently as July. All being equal, these rates are expected to fall further over the coming months.”
