House prices fell 2% in December, says Halifax, predicting an 8% drop this year

House prices slumped 2% in December, says Halifax: Lender forecasts 8% drop in 2023 as cost of living crisis weighs on property market

  • Monthly growth hit -1.5% in December, slightly more than November’s -2.4%
  • The average UK house price is now £281,272, down from £285,425.

House prices fell 1.5 per cent in December taking the average UK house price to £281,272, down from £285,425, according to Halifax’s latest house price index.

Annual growth sat at 2 per cent, well below November’s figure of 4.6 per cent.

However, despite the slump the average house price remains 11 per cent higher than it was at the start of 2021, when the pandemic saw record price growth.

Halifax HPI: Annual rate of growth dropped to 2.0% in the last month of the year

Kim Kinnaird, director, Halifax Mortgages, said: ‘As we’ve seen over the past few months, uncertainties about the extent to which cost of living increases will impact household bills, alongside rising interest rates, is leading to an overall slowing of the market.

‘As we enter 2023, the housing market will continue to be impacted by the wider economic environment and, as buyers and sellers remain cautious, we expect there will be a reduction in both supply and demand overall, with house prices forecast to fall around 8 per cent over the course of the year.

‘It’s important to recognise that a drop of 8 per cent would mean the cost of the average property returning to April 2021 prices, which remains significantly above pre-pandemic levels.’

A forecast of an 8 per cent drop in prices puts Halifax’s prediction within the scale of other views in the market. 

Predictions vary, but several analysts have suggested house prices could fall between 10 and 15 per cent over the next two years.

The Office for Budget Responsibility has said house prices are set to fall 9 per cent between the end of 2022 and the end of 2024.

And elsewhere estate agent Savills has updated its forecast to a 10 per cent fall in house prices over 2023.

>> Read our round up of the property market predictions for the year ahead

 All nations and regions saw annual house price inflation, although the rate of growth has slowed, Halifax said.

On an annual basis, the North East saw the greatest slowdown in growth, with annual house prices rising by 6.5 per cent, compared to 10.5 per cent the prior month. Average house prices in the region are now £169,980.

Simon Gerrard, managing director of Martyn Gerrard estate agents comments:’But the big issue continues to be supply. There simply aren’t enough properties coming onto the market, which could well have reduced the magnitude of today’s reported drop in house prices, which is lower than that for November.’

 Iain McKenzie, CEO of The Guild of Property Professionals, adds: ‘After hitting an all-time high of nearly £300,000 in the summer, house prices have now fallen back below the level they were in March. There’s no need to panic, as a readjustment in the market was to be expected following more than two years of inflated house prices.

‘Fortunately for sellers, the demand for quality housing is still high, and many areas of the country are still seeing a shortage of stock, which will keep prices buoyant in the months ahead.

‘Pessimism over the future of house prices may be misplaced. Employment figures remain strong, and there are signs we may soon see falls in the wholesale fuel prices, which have helped drive up inflation and the cost of living over the past year.’

What to do if you need a mortgage 

Borrowers who need to find a mortgage because their current fixed rate deal is coming to an end, or because they have agreed a house purchase, should explore their options as soon as possible.

This is Money’s best mortgage rates calculator powered by L&C can show you deals that match your mortgage and property value

What if I need to remortgage? 

Borrowers should compare rates and speak to a mortgage broker and be prepared to act to secure a rate. 

Anyone with a fixed rate deal ending within the next six to nine months, should look into how much it would cost them to remortgage now – and consider locking into a new deal. 

Most mortgage deals allow fees to be added the loan and they are then only charged when it is taken out. By doing this, borrowers can secure a rate without paying expensive arrangement fees.

What if I am buying a home? 

Those with home purchases agreed should also aim to secure rates as soon as possible, so they know exactly what their monthly payments will be. 

Home buyers should beware overstretching themselves and be prepared for the possibility that house prices may fall from their current high levels, due to  higher mortgage rates limiting people’s borrowing ability.

How to compare mortgage costs 

The best way to compare mortgage costs and find the right deal for you is to speak to a good broker.

You can use our best mortgage rates calculator to show deals matching your home value, mortgage size, term and fixed rate needs.

Be aware that rates can change quickly, however, and so the advice is that if you need a mortgage to compare rates and then speak to a broker as soon as possible, so they can help you find the right mortgage for you.

> Check the best fixed rate mortgages you could apply for