Last week, the average five-year fixed-rate mortgage breached 6% for the first time in 12 years, while the average two-year fixed rate has passed the mark for the first time since 2008
Increasing mortgage costs and the wider cost of living crisis will place downward pressure on UK home prices over the next few months, according to Halifax.
The latest property price data from the mortgage lender reveals that the average price of a home fell by 0.1% in September.
Halifax said market activity had cooled in recent month, with a further slowdown widely expected in the coming months as rising borrowing costs make buying a property unaffordable for more people.
The housing market may have already entered a more sustained period of slower growth, said Kim Kinnaird, the director at Halifax Mortgages. The prospect of interest rates continuing to rise sharply amid the cost-of-living squeeze, plus the impact in recent weeks of higher mortgage borrowing costs on affordability, are likely to exert more significant downward pressure on house prices in the months ahead.
Last week, the average five-year fixed-rate mortgage breached 6% for the first time in 12 years, while the average two-year fixed rate has passed the mark for the first time since 2008.
About 1,000 deals have been pulled from the market in recent weeks after Kwasi Kwarteng’s mini-budget triggered a sell-off in financial markets and raised expectations for even higher interest rates.
Halifax said a typical UK property now costs £293,835 as the pace of annual growth slowed for the third month in row, from 11.4% in August to 9.9% in September, the first time it has dropped into single digits since January.
Tom Bill, head of UK residential research at Knight Frank, commented: It’s a fairly safe bet that UK house prices have now peaked. The impact of rising mortgage rates will begin to hit demand and spending power in coming months, which we believe will lead to a fall of 10% over the next two years for UK prices.
He said: We may see mortgage rates fall to some extent if financial markets become more reassured by the government’s economic plan but the events of the last fortnight have been a reminder that the era of ultra-low rates is coming to an end.
