UK house prices fall for first time in six months amid more costly mortgages | Housing market

UK house prices fell in March for the first time in six months as more costly mortgage deals and continued uncertainty about when the Bank of England would start cutting interest rates hit the property market.

House prices fell by 1%, or £2,908, in March compared with February, according to Halifax’s house price index. The average property now costs £288,430. Compared with the same month last year, property prices were up 0.3%.

The Halifax index showed similar trends to that reported by Nationwide, which said this week that the average price of a home fell 0.2% from February to March, to £261,142, after a seasonal adjustment to the figures.

Mortgage deals offered by lenders have ticked up since the start of the year. Financial markets have become less optimistic about the degree and timing of future interest rate cuts as core inflation proves stickier than generally expected.

Mortgage rates for borrowers fell as low as 5.55% for an average two-year fixed-rate deal in January as lenders vied for new business.

However, deals began to edge up, and the average two-year fixed rate rose from 5.59% to 5.76% between the start of February and the beginning of March and is now 5.8%, according to Moneyfacts. During the same period, the average cost of a five-year fixed-rate mortgage rose from 5.23% in February and now stands at 5.39%.

Kim Kinnaird, the director of Halifax Mortgages, said the market had shown “surprising resilience” despite higher borrowing costs.

“That a monthly fall should occur following five consecutive months of growth is not entirely unexpected, particularly in view of the reset the market has been going through since interest rates began to rise sharply in 2022,” she said.

“Affordability constraints continue to be a challenge for prospective buyers, while existing homeowners on cheaper fixed-term deals are yet to feel the full effect of higher interest rates. This means the housing market is still to fully adjust, with sellers likely to be pricing their properties accordingly.”

She said that prices had not changed much over the past couple of years and were still almost £50,000 above pre-pandemic levels but added that, with only a modest improvement in affordability on the horizon, “this will likely limit the scope for significant house price increases this year”.

Estate agents said the market remained resilient. Nicky Stevenson, the managing director at the national estate agent group Fine & Country, said: “An increasingly busy property market helped to prop up prices on an annual basis at the beginning of spring, but the monthly fall shows there is still some turbulence.

“Buyers are in a strong position and vendors are more open to negotiation, which is bringing prices down in some areas.”

Guy Gittins, the chief executive of Foxtons, said: “House prices have continued to creep up since the start of the year and this improvement in market health has been driven by the returning appetite of UK homebuyers.”