UK house prices have fallen for the first time this year but experts say summer distractions rather than deteriorating economic conditions are to blame.
Figures released by Rightmove show that the average price of a UK property dropped to £365,173 in August, marking a 1.3%, or £4,795, decline.
While there are concerns that rising interest rates – increased in response to soaring inflation – could weigh on the housing market, Rightmove said the dip was broadly in line with summer price trends over the past decade and would probably recover once house hunters returned from holiday breaks, which for many were the first since Covid restrictions were lifted.
“A drop in asking prices is to be expected this month as the market returns towards normal seasonal patterns after a frenzied two years, and many would-be home movers become distracted by the summer holidays,” Tim Bannister, a Rightmove director, said.
Rightmove said sellers who need to move quickly tend to drop their prices in order to ensure they can close deals and move in by Christmas. That is partly because the average time to accept and complete a sale is now about four and a half months.
While a number of mortgage lenders, including Barclays, believe interest rates could creep towards 2.5% by the end of the year, resulting in higher costs for borrowers, those pressures are only expected to slow the pace of house price growth rather than reverse it.
Lloyds Banking Group, which owns Halifax and is the country’s largest mortgage lender, said last month that while it was bracing itself for a slowdown in property price growth and mortgage lending, its own rate of lending was still likely to grow by single digits over the next 12-18 months.
Rightmove said it still expects UK house prices to end the year 7% higher than in 2021, despite wider economic uncertainty and fears that rising prices for food and fuel could send the UK into recession later this year.
The property website said a lack of supply would continue propping up prices, given that the level of available stock is down 39% compared with 2019. Although buyer inquiries are down 4% compared with 2021, they are still 20% higher than before the Covid outbreak.
“It’s likely that the impact of interest rate rises will gradually filter through during the rest of the year but right now the data shows that they are not having a significant impact on the number of people wanting to move,” Bannister said.
“Demand has eased a degree and there is now more choice for buyers but the two remain at odds and the size of this imbalance will prevent major price falls this year.”
He said would-be home buyers concerned about rising rates should secure a mortgage in principle early in order to understand what they can afford, confirm the rates available and assess what they would be able to repay each month.
Rightmove has confirmed that the average monthly mortgage payment for a first-time buyer with a 10% deposit pushed past £1,000 for the first time this month.
