House prices recorded the biggest monthly fall in October since early 2021, according to the latest Halifax index.
The average property value fell by 0.4%, marking the third month-on-month drop seen in the past four months. This decrease follows monthly falls of 0.1% in both July and September and a 0.3% increase in August.
Annual house price growth slowed to 8.3% in October, from 9.8% growth recorded in September.
Across the UK, the average house price in October was £292,598 - the lowest figure since May this year - although typical prices remained near record highs, Halifax said.
In Scotland the average house price stood at £203,820 - up by 7.5% last month - according to Halifax.
Annual price growth among homemovers fell to 8.9% in October, from 10.3% in September.
The price growth slowdown for first-time buyers was more notable, slowing from 10.1% in September to 7.5% in October.
Kim Kinnaird, director of Halifax Mortgages, said: “Though the recent period of rapid house price inflation may now be at an end, it’s important to keep this in context, with average property prices rising more than £22,000 in the past 12 months, and by almost £60,000 (25.7%) over the last three years, which is significant.
“While a post-pandemic slowdown was expected, there’s no doubt the housing market received a significant shock as a result of the mini budget, which saw a sudden acceleration in mortgage rate increases.
“While it is likely that those rates have peaked for now - following the reversal of previously announced fiscal measures - it appears that recent events have encouraged those with existing mortgages to look at their options, and some would-be homebuyers to take a pause.
“The rising cost of living coupled with already stretched mortgage affordability is expected to continue to weigh on activity levels,“ Kinnaird continued. “With tax rises and spending cuts expected in the autumn statement, economic headwinds point to a much slower period for house prices.“
While certain longer-term, structural market factors which support higher house prices - like the shortage of available properties for sale - are likely to remain, how significantly prices might ultimately adjust will also be determined by the performance of the labour market.
Last week, the Bank of England increased the base rate to 3%, from 2.25% previously.
This was the latest in a string of base rate increases, meaning that since December last year the average monthly tracker mortgage payment will have increased by £284.17 in total, according to figures from trade association UK Finance.
Jason Tebb, chief executive officer of property search website OnTheMarket, said: “Sellers are likely to find that if they don’t price realistically, they may struggle to generate interest.”
Alice Haine, a personal finance analyst at Bestinvest, added: “With inflation at a 40-year high of 10.1%, interest rates at 3%, the economy slowing and the mortgage market still reeling from the effects of Liz Truss’s short tenure as prime minister, affordability is very much in the spotlight, with buyers forced to confront whether now really is the right time to buy.”
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