UK house prices fall at steepest rate in more than three years

UK house prices plummeted at their fastest pace in over three years in October, with the average property price dropping by 0.6% to £296,285, according to Lloyds. This marked the fourth consecutive monthly decline, driven by high mortgage rates that have dampened the housing market. The average UK property price fell by 0.6% compared to September, the steepest drop since Lloyds recorded a 1.6% decrease in August 2023.

Analysts had anticipated a slight 0.1% increase, which would have been the first monthly rise since June. House prices were 1.2% lower than last year's same month, the steepest annual decline since October 2023.

Andrew Asaam, mortgages director at Lloyds, attributed the decline to challenging economic conditions, including renewed inflationary pressures from the Middle East conflict. These factors have kept borrowing costs high, putting pressure on household finances and making buyers more cautious. Current average mortgage rates are 5.97% for two-year fixed rates and 5.99% for five-year fixed rates, according to Moneyfacts.

The situation worsened after the Bank of England raised the base rate by 0.25% to 4% to combat inflation, the first increase in three years. The Middle East conflict has driven oil prices above $100 per barrel, leading to soaring fuel prices and pushing inflation to 3.5% in September. Savills, a property services company, forecasts the market will not recover until 2028, citing the need for economic improvement and more affordable mortgages to spur a rebound.