Lloyds Records Steepest UK Property Price Fall in More Than Three Years
In October, property values across the UK experienced their steepest downward slide in over three years, registering a fourth consecutive monthly drop as elevated borrowing expenses weighed on the property market. The average price of a typical UK property stood at £296,285 last month after an unexpected 0.6% drop compared with September. That marked the sharpest monthly decline since Lloyds recorded a 1.6% drop in August 2023.
Forecasters had predicted a modest 0.1% monthly gain that would have broken the streak of decreases starting after June. House prices were down 1.2% compared with the same month last year, representing the biggest annual fall since October 2023.
Andrew Asaam Explains Economic Pressures Behind Squeezed Buyer Demand
“Housing demand is currently being tested by a challenging economic backdrop,” said Andrew Asaam, the mortgages director at Lloyds. Asaam noted that household financial strains and elevated borrowing expenses are being sustained by fresh inflationary pressures stemming partly from the Middle Eastern conflict.
Prospective buyers face increasingly high borrowing costs across the lending market. The average two-year fixed mortgage runs at 5.97%, while the average five-year fixed rate stands at 5.99%, according to the latest Moneyfacts market update. These figures followed a quarter-point base rate increase by the Bank of England’s monetary policy committee, pushing the rate to 4% in an effort to fight inflationary pressure caused by the conflict in the region.
Amy Reynolds Points to Psychological Damage as Greater London Prices Drop 3.1 Percent
“The market has lost some momentum as we head towards the end of the year,” said Amy Reynolds, the head of sales at the Richmond estate agency Antony Roberts. Reynolds added that while buyers remain active, caution dominates their decisions, with remortgagers and second-steppers trying to stretch to one more bedroom facing the hardest hits.
“The real damage is psychological,” Reynolds said. “Another rise tells people that borrowing is getting more expensive, not cheaper, and that makes them hesitate.”
While annual house price growth remains relatively strong in Northern Ireland, Scotland, and Wales, the south of England faces growing downward pressure. The steepest annual drop for October occurred in Greater London, where values slumped 3.1% compared to the previous year, resulting in an average property price of £524,892. The south-east and south-west of England followed with annual declines of 2.4% last month, bringing average prices to £379,258 and £298,057 respectively.
Rightmove Downgrades Guidance as Property Portal Reports 10 Percent Drop in Buyer Demand
Reflecting the current market slowdown in data covering the four-month period up to October 31, digital real estate platform Rightmove adjusted its revenue and profit growth projections down to the conservative end of its forecast range. High mortgage rates resulted in buyer demand falling by 10%, alongside a 9% drop in agreed sales as record numbers of homes on the market exerted downward pressure on prices.
Savills reported this week that Britain’s sluggish housing market is not expected to recover until 2028, when a forecast improvement in the economy and mortgage affordability should support a broader market recovery. Meanwhile, the rental market saw an increase in inquiries per property, with prices rising 2.9% year-on-year, even as Rightmove recorded 6% fewer new homes on its website compared with the end of last year.
Frequently Asked Questions About the UK Housing Market Slump
What is the current average price of a UK property?
The average price of a typical UK property stood at £296,285 in October, following an unexpected 0.6% monthly price drop reported by Lloyds.
Why are mortgage rates remaining high for UK borrowers?
Renewed inflationary pressures driven by the conflict in the Middle East have pushed oil prices above $100 a barrel and raised inflation to 3.5%, prompting the Bank of England to raise its base rate to 4%.
When do property experts expect the UK housing market to recover?
Property services company Savills reported that the sluggish market is not expected to recover until 2028, when projected improvements in the wider economy and mortgage affordability take effect.
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