House prices took a dip in March, marking the first decline in six months, as per the latest figures from Halifax. The lending institution reported a 1% decrease in prices, attributing it to the impact of higher mortgage rates on affordability for potential buyers. On average, house prices dropped by approximately £2,900 to £288,430.
Nevertheless, Halifax noted that despite the monthly decline, house prices were still higher compared to the previous year. March showed a 0.3% increase in prices from the same time last year, although this was a slowdown from the 1.6% annual rise witnessed in February.
Kim Kinnaird, director of Halifax Mortgages, remarked that the drop in prices between February and March was somewhat anticipated, especially considering the adjustments the market has been undergoing since the significant rise in interest rates since 2022. Despite these fluctuations, Kinnaird highlighted the resilience of house prices in the face of elevated borrowing costs.
“Affordability challenges persist for potential buyers,” she stated, “while existing homeowners with lower fixed-term deals are yet to experience the full impact of higher interest rates.”
Halifax’s findings align with those of Nationwide, another lender, which also reported a decline in house prices in March earlier this week. Sarah Coles, head of personal finance at Hargreaves Lansdown, noted that the increase in mortgage rates had finally started to affect the housing market, with the momentum from buyers securing cheaper mortgages in January tapering off.
The Bank of England‘s decision to raise interest rates, starting from the end of 2021, in response to inflation concerns, has led to a ripple effect on mortgage rates, making borrowing for property purchases more costly. Although mortgage rates had peaked last summer and began to decline as expectations of rate cuts grew, uncertainties surrounding the pace of rate reductions have hindered further drops in mortgage rates, with some lenders even increasing them.
“The housing market‘s trajectory remains sensitive to interest rate adjustments,” Kinnaird remarked. “With only a slight improvement in affordability expected in the near future, significant increases in house prices this year are likely to be constrained.”
Halifax’s house price data is derived from its mortgage lending activities, excluding cash buyers and buy-to-let transactions, which together account for about a third of housing sales
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