The UK's largest mortgage lender, Halifax, has forecasted that house prices will continue to decline into the next year, although the pace of reduction has moderated.

In September, the Halifax, a part of Lloyds Banking Group, reported that property prices were 4.7% lower compared to the same month a year ago. While prices dropped by 0.4% from the previous month, this decrease was notably less steep than previous declines.

The lender attributed these price trends to the impact of high interest and mortgage rates on the housing market. Kim Kinnaird, director of Halifax Mortgages, stated that "homeowners inevitably become more realistic about their target selling price, reflecting what has increasingly become a buyer's market."

However, she also pointed out that the expectation of sustained higher interest rates, for a longer duration than initially anticipated, would dampen demand and exert "downward pressure on house prices into next year."

Halifax's report aligns with recent observations from Nationwide, which indicated that buyers, faced with elevated mortgage rates, were opting for smaller and more affordable properties.

It's worth noting that both Halifax and Nationwide surveys rely on data from their own mortgage lending activities and do not encompass cash transactions or buy-to-let purchases. Official data shows that cash buyers now constitute more than one-third of housing sales.

The September price decline marked the sixth consecutive monthly decrease, resulting in the average cost of a UK home standing at £278,601. However, this figure is still £39,400 higher than in March 2020, when property prices began their ascent during the pandemic.

Nicky Stevenson, managing director at estate agent group Fine and Country, noted, "The property market is now offering a more substantial supply of homes than it did in 2021 when buying activity was frantic. This is providing buyers with more choices and negotiation leverage, although it is also contributing to price declines during negotiations with sellers."

While property prices currently sit approximately £14,000 below the August 2022 peak, they remain 1% higher than they were in December 2021, when the Bank of England commenced its series of base rate hikes.

Alice Haine, a personal finance analyst from the investment platform Bestinvest, suggested that the housing market was likely to remain subdued into the next year, influenced by the impact of the Bank of England's 14 interest rate hikes on affordability levels. Some buyers have had to reduce the size and value of their homes to manage mortgage repayments, while others have postponed their moving plans altogether. Haine also mentioned that some first-time buyers may welcome falling prices and could opt for longer-term mortgages to spread out the costs, despite the higher long-term expenses.

[Source: BBC News]