UK house prices fell 0.6% in October compared with September, the steepest monthly decline since August 2023. The average price of a typical home stood at £296,285, marking a fourth consecutive monthly drop. Analysts had expected a small rise of 0.1%. On an annual basis, prices were down 1.2%, the largest year-on-year fall since October 2023.
The decline comes as high mortgage rates continue to squeeze buyers. The average two-year fixed mortgage rate is 5.97% and the average five-year fixed rate is 5.99%, according to Moneyfacts. The Bank of England a day earlier raised its base rate by a quarter point to 4%, the first increase in three years, in response to inflationary pressures from the conflict in the Middle East, which has driven oil above $100 a barrel and pushed inflation to 3.5% in September.
“Housing demand is currently being tested by a challenging economic backdrop,” said Andrew Asaam, mortgages director at Lloyds. “Renewed inflationary pressures, driven in part by the conflict in the Middle East, are keeping borrowing costs high and adding to the squeeze on household finances, making some buyers understandably more cautious.”
Amy Reynolds, head of sales at Richmond estate agency Antony Roberts, said: “Buyers are still out there, but they’re being careful. The people hit hardest are those remortgaging and second-steppers trying to stretch to one more bedroom. The real damage is psychological. Another rise tells people that borrowing is getting more expensive, not cheaper, and that makes them hesitate.”
Property services company Savills said this week that Britain’s sluggish housing market was not expected to recover until 2028, when a forecast improvement in the economy and mortgage affordability are expected to support a recovery.
Analysis
Why This Matters
- Homebuyers face continued affordability pressure as borrowing costs remain elevated, potentially delaying purchase decisions.
- Homeowners coming to the end of fixed-rate deals may struggle with higher monthly payments, increasing the risk of defaults or forced sales.
- The sluggish market could weigh on consumer confidence and broader economic activity, with a recovery not forecast until 2028.
Background
The UK housing market has cooled sharply since 2022 after a period of rapid price growth. The Bank of England's interest rate rises, intended to curb inflation, have pushed mortgage rates to multi-year highs. The current downturn is compounded by geopolitical tensions in the Middle East, which have driven up energy costs and kept inflation above the Bank's 2% target. The industry typically watches the Lloyds house price index as a leading indicator of market trends.
Key Perspectives
Andrew Asaam (mortgages director, Lloyds): said housing demand is being tested by a challenging economic backdrop, with renewed inflationary pressures from the Middle East conflict keeping borrowing costs high and making buyers cautious.
Amy Reynolds (head of sales, Antony Roberts): reported that buyers are still active but careful, and that the psychological impact of rate rises makes people hesitate, hitting those remortgaging and second-steppers hardest.
Savills (property consultancy): forecast that the market will not recover until 2028, when economic improvement and better mortgage affordability may support a turnaround.
What to Watch
- The direction of mortgage rates: any further rises could deepen the downturn.
- Bank of England decisions: another rate increase would likely prolong the slump.
- Inflation data: if Middle East tensions ease and oil prices fall, borrowing costs could stabilize.
Checked
12 claims in this story checked against 1 source: 12 supported.
Show each claim
- SupportedUK house prices fell at their steepest monthly rate in more than three years.UK news | The Guardian: “UK house prices fell at the steepest rate in more than three years in October”
- SupportedPrices fell 0.6% in October compared with September, the steepest fall since August 2023.UK news | The Guardian: “prices unexpectedly fell 0.6% compared with September, the steepest fall since the lender Lloyds recorded a 1.6% drop in August 2023.”
- SupportedThe average price of a typical UK property was £296,285.UK news | The Guardian: “The average price of a typical UK property stood at £296,285 last month”
- SupportedThe October decline was the fourth consecutive monthly decline.UK news | The Guardian: “marking the fourth consecutive monthly decline”
- SupportedAnalysts had expected a monthly rise of 0.1%.UK news | The Guardian: “Analysts had expected a small monthly rise of 0.1%”
- SupportedPrices were down 1.2% year on year, the biggest annual fall since October 2023.UK news | The Guardian: “House prices were down 1.2% compared with the same month last year, the biggest annual fall since October 2023.”
- SupportedAndrew Asaam of Lloyds said, “Housing demand is currently being tested by a challenging economic backdrop,” and said inflationary pressures were keeping borrowing costs high and squeezing household finances.UK news | The Guardian: ““Housing demand is currently being tested by a challenging economic backdrop,” said Andrew Asaam, the mortgages director at Lloyds. “Renewed inflationary pressures, driven in part by the conflict in the Middle East, are keeping borrowing costs high and adding to the squeeze on household finances, making some buyers understandably more cautious.””
- SupportedAmy Reynolds of Antony Roberts said: “Buyers are still out there, but they’re being careful. The people hit hardest are those remortgaging and second-steppers trying to stretch to one more bedroom. The real damage is psychological. Another rise tells people that borrowing is getting more expensive, not cheaper, and that makes them hesitate.”UK news | The Guardian: ““Buyers are still out there, but they’re being careful. The people hit hardest are those remortgaging and second-steppers trying to stretch to one more bedroom. The real damage is psychological. Another rise tells people that borrowing is getting more expensive, not cheaper, and that makes them hesitate.””
- SupportedThe average two-year fixed mortgage rate was 5.97% and the average five-year fixed rate was 5.99%, according to Moneyfacts.UK news | The Guardian: “the average two-year fixed mortgage running at 5.97% and the average five-year fixed rate at 5.99%, according to the latest Moneyfacts market update.”
- SupportedThe Bank of England raised its base rate by a quarter point to 4% a day earlier, its first increase in three years.UK news | The Guardian: “The figures come a day after the Bank of England’s monetary policy committee put up the base rate by a quarter of a point to 4%, the first increase in three years”
- SupportedThe conflict in the Middle East drove oil above $100 a barrel and pushed inflation to 3.5% in September.UK news | The Guardian: “The conflict in the Middle East has driven the price of oil above $100 a barrel in recent months, resulting in soaring fuel prices and pushing inflation to 3.5% in September .”
- SupportedSavills said Britain’s sluggish housing market was not expected to recover until 2028, when an improved economy and mortgage affordability were expected to support recovery.UK news | The Guardian: “The property services company Savills this week said Britain’s sluggish housing market was not expected to recover until 2028 , when a forecast improvement in the economy and mortgage affordability are expected to support a recovery.”