House prices fall by more than five per cent in last 12 months

House prices fell by almost one per cent in August according to a report by the Swindon based Nationwide.

According to the building society the average house price is now 5.3 per cent below the peak of last year.

The decrease represents annual fall of around £14,600 on a typical home.

Alice Haine, personal finance analyst at Bestinvest, the DIY investment platform and coaching service,  said:       “Britain’s housing market continued to cool in August, with prices down 5.3 per cent on the year – the weakest annual rate in 14 years – as buyer demand slumped in response to sky-high mortgage rates and persistently high living costs.

“The monthly data was no rosier with prices dropping 0.8 per cent in July compared to June taking the average price of a home to £259,153. “

Fourteen interest rises since December 2021 mean mortgage affordability is now a major challenge for first-time buyers and existing homeowners looking to refinance.

Those emerging from cheap fixed-rate mortgages taken out in 2021 now face significantly higher repayment levels that put stretched disposable household incomes at risk. Meanwhile, first-time buyers shopping around for their first mortgage may find that monthly rents are less than the payments on a home loan unless they consider a longer mortgage term, such as 30 or 40 years, to bring repayments down.

With the Bank of England likely to push ahead with its 15th interest rate rise at its meeting this month and the potential for more rate rises to come, the outlook for the property market remains gloomy.

Mortgage approvals fell almost 10 per cent in July with net mortgage lending increasing by just £200m on the previous month.

The weaker lending data is expected to feed through to house prices, exacerbating the dampening effect high interest rates are already having on the property market.

For buyers, mortgage rates have eased from their July highs with some cuts among major lenders who are starting to compete more aggressively for business.