London house prices slump again as high interest rates pile pain on mortgage holders
London house prices cratered again in September as the Bank of England’s interest rate hikes continue to pile pain on mortgage holders and weigh on the housing market.
House prices in the capital have fallen 4.8 per cent over the last year, the biggest fall of any region in cash terms at an average of £26,514, according to the Halifax House Price Index.
The average house price nationally fell by 0.4 per cent in September, the sixth consecutive month of decline, despite a marked slowdown in pace from the 1.8 per cent notched in August.
Halifax analysts said rate hikes were likely to continue to drag on prices into next year.
“Many economists and financial markets predict that ase Rate will remain higher for longer, with any significant cuts appearing unlikely until inflation gets closer to the Bank of England’s two per cent target,” said Kim Kinnaird, director of Halifax Mortgages.
“Overall, these factors are likely to keep mortgage rates elevated in comparison to recent years, constraining buyer demand and putting downward pressure on house prices into next year.”
The Bank paused its rate hiking campaign and held the base rate at 5.25 per cent last month. However, analysts are expecting Threadneedle Street to hold rates elevated for longer, meaning that mortgages will remain expensive for some time to come.
London remains the most expensive place in the UK to purchase a home, with an average property price of £525,678. However, it has seen prices down by 4.8 per cent over the last year, the biggest fall of any region in cash terms at an average of £26,514.
Commenting on the report, Alice Haine, Personal Finance Analyst at Bestinvest said “the housing market is expected to remain subdued into the next year as the drag effect from the Bank of England’s 14 interest rate hikes delivers a heavy blow to affordability levels.
“While some buyers have been forced to reduce the size and value of the home they purchase to afford mortgage repayments, others are abandoning moving plans altogether.”
She added however, “there is some reason for optimism in the market, however. Mortgage rates have eased over the summer from their July peak with the average two-year fixed rate now below the 6.5 per cent mark and the average five-year fixed rate nudging below six per cent as interest rate expectations improve and lenders compete more aggressively for business.”