The average UK house price dropped by 4.6% in August, falling at the fastest rate since 2009, according to an index.
But despite dropping by £14,000 over the past year, the average house price remains around £40,000 – or 17% – above pre-pandemic levels, Halifax said.
Annual house price falls were recorded generally across the UK, but the lender said it should be noted that the drops are from record-high property prices seen last summer.
Across the UK, the average house price in August was £279,569.
The typical property value fell by 1.9% month on month in August, marking the largest monthly fall since November 2022.
Kim Kinnaird, director, Halifax Mortgages, said: “The average home now costs £279,569, down by around £5,000 since July, and back to the level seen at the start of last year.
“On an annual basis, prices fell by 4.6%, the biggest year-on-year decrease since 2009, though it should be noted that this is relative to the record-high property prices seen last summer.
“It’s fair to say that house prices have proven more resilient than expected so far this year, despite higher interest rates weighing on buyer demand.
“However, there is always a lag-effect where rate increases are concerned, and we may now be seeing a greater impact from higher mortgage costs flowing through to house prices.
“Increased volatility month to month is also to be expected when activity levels are lower, though overall the pace of decline remains in line with our outlook for the year as a whole.
Rates remain much higher compared to recent years. This may well have prompted prospective buyers to defer transactions in the hope of some stability, and greater clarity on the future direction of rates in the coming months— Kim Kinnaird, Halifax Mortgages
“Market activity levels slowed during August and, while there is always a seasonality effect at this time of year, it also isn’t surprising given the pace of mortgage rate increases over June and July.
“While these did ease last month, rates remain much higher compared to recent years. This may well have prompted prospective buyers to defer transactions in the hope of some stability, and greater clarity on the future direction of rates in the coming months.
“The market will continue to rebalance until it finds an equilibrium where buyers are comfortable with mortgage costs in a higher range than seen over the previous 15 years.
“We do expect further downward pressure on property prices through to the end of this year and into next, in line with previous forecasts.”
She added: “Income growth has remained strong over recent months, which has seen the house price-to-income ratio for first-time buyers fall from a peak of 5.8 in June last year to now 5.1.
“This is the most affordable level since June 2020, and will be partially offsetting the impact of higher mortgage costs.”
Buyers and sellers knew interest rates would rise after being close to zero for 14 years - they just didn’t expect it to feel like being strapped into a rollercoaster— Tom Bill, Knight Frank
Nicky Stevenson, managing director at estate agent group Fine & Country, said: “The number of properties available for sale remains constrained compared to 2019, which was a fairly typical year for the housing market. This is playing a part in preventing bigger falls in prices even though affordability is tight.”
Tom Bill, head of UK residential research at estate agent Knight Frank, said: “Buyers and sellers knew interest rates would rise after being close to zero for 14 years – they just didn’t expect it to feel like being strapped into a rollercoaster.
“We don’t anticipate a cliff-edge moment for prices but a single-digit decline this year is likely to be repeated next year.”
Mark Manning, managing director of Northern Estate Agencies Group, said falling house prices are not going to come as a surprise to many, “but it overcooks what is happening here in Yorkshire, Greater Manchester and Lancashire.
“We continue to see a really resilient housing market in these northern regions, with average prices holding up well – which is remarkable considering everything that has been thrown at sellers and buyers over the last 18 months.”
With Scottish schools back earlier than in England, August was a busy month— Ross McMillan, Blue Fish Mortgage Solutions
Rhys Schofield, brand director at Derbyshire-based mortgage advisers Peak Mortgages and Protection, said: “As bellwether months go, September is traditionally one of the year’s busiest so let’s see how this month unfolds.”
Ross McMillan, who owns Glasgow-based Blue Fish Mortgage Solutions, said: “The Scottish property market is definitely displaying more resilience than other areas of the UK.
“With Scottish schools back earlier than in England, August was a busy month, with a fair amount of new inquiries, predominantly from first-time buyers.
“Properties priced at £250,000 and below are generally performing very well, and offers above home report valuation remain the norm.”
Jeremy Leaf, a north London estate agent, said: “The penny has dropped for the majority of sellers who are recognising that they may not achieve what they originally anticipated.
“As many sellers are also buyers, they realise that, although they may have to accept less than they initially wanted for their property, they will also pay less for their next home, which is significant as many will be trading up.”
Matt Thompson, head of sales at London-based estate agent Chestertons, said: “Property buyers are adopting a more strategic and flexible property search by adjusting their budget or widening their search criteria to find a suitable home.”
Halifax said that, across the UK, northern locations are generally proving to be more resilient than southern areas.
The South East, where people often have to find big deposits and spend high amounts on monthly mortgage payments, experienced the biggest annual house price drop. House prices have fallen by 5.0% annually.
In Wales, which has recorded some of the biggest gains in property prices during the pandemic-driven “race for space”, property prices have fallen by 4.7% annually.
In Northern Ireland, property prices fell by 1.5% annually, while in Scotland, property prices fell by 0.6%, marking the slowest annual pace of decline in the UK.
In London, house prices fell by 4.1% annually. In cash terms, it recorded the biggest annual decline across the UK, with prices there having fallen by £22,777 on average.
The continued demand for good quality housing is keeping house prices propped up, but affordability concerns and the slower rates of mortgage approvals is stopping growth— Iain McKenzie, Guild of Property Professionals
Iain McKenzie, chief executive of the Guild of Property Professionals, said: “The continued demand for good quality housing is keeping house prices propped up, but affordability concerns and the slower rates of mortgage approvals is stopping growth.”
Here are average house prices across the UK and the annual fall, according to Halifax:
– East Midlands, £236,743, minus 2.8%
– Eastern England, £330,840, minus 3.4%
– London, £529,814, minus 4.1%
– North East, £167,249, minus 1.2%
– North West, £224,501, minus 1.6%
– Northern Ireland, £182,700, minus 1.5%
– Scotland, £201,932, minus 0.6%
– South East, £379,565, minus 5.0%
– South West, £298,496, minus 4.4%
– Wales £212,967, minus 4.7%
– West Midlands, £249,413, minus 1.4%
– Yorkshire and the Humber, £201,763, minus 2.6%