House prices see biggest yearly fall in 14 years

House prices have been falling over the past few months and it is expected that this trend will continue well into 2024 and possibly beyond.

So what does this mean if you are currently looking to buy or sell a property, or plan to in the near future?

The fall in house prices has been caused by higher interest rates, set by the Bank of England, which results in mortgages becoming more expensive. With the cost of mortgages increasing, people looking to purchase a home are having to adjust their budget to ensure they can afford their monthly costs. And with buyers looking to spend less, we typically see the housing market react by reducing prices as sellers endeavor to make their property more viable for potential takers.

The Bank of England has raised interest rates 14 times in a row as it battles to bring down inflation and has warned they are likely to remain high for some time. Due to increased mortgage costs caused by interest rate rises, there has been a 28 percent drop in the number of people buying with a mortgage and this has resulted in the number of house and flat sales in the UK this year being set to be the lowest in a decade.

So, with housing prices falling, is buying a home now more affordable?

Unfortunately not, well at least not yet, as asking prices have not yet fallen far enough to balance out the increased mortgage costs. If however, the housing market continues to fall as sellers continue to reduce their price, and if wages increase faster than house price recovery, there is a possibility that buying a property will become more affordable in the future – but there are a lot of ‘moving parts’ required for this to happen.

What can we expect over the next 6 months and more?

It is unclear if the Bank of England will increase interest rates again, however some experts are predicting an increase of 0.25%. The next review is towards the end of September and if interest rates continue to increase, we can expect to see house prices continuing to fall.