The drop in November is the largest reported since October 2008, and the third consecutive monthly house price fall.
The annual rate of growth fell from 8.2% in October to 4.7% in November.
Following these declines, the average cost of a home in the UK now stands at £285,579 – down from £292,406 last month, according to the lender’s figures.
“While a market slowdown was expected given the known economic headwinds – and following such extensive house price inflation over the last few years – this month’s fall reflects the worst of the market volatility over recent months,” said Kim Kinnaird, director at Halifax Mortgages.
Jeremy Leaf, north London estate agent, said: “The housing market surveys are catching up with what’s been happening on the ground for the past few months.
“Existing sales are holding up, providing no-one in the chain has to remortgage at a much higher rate. As a result, prices are softening but continue to be supported by low stock and strong employment.
“New business is hard to come by and only slowing returning now lending rates are starting to fall with buyers factoring in where they expect pricing to be next year.”
Zaid Patel, director at London-based estate agents, Highcastle Estates, commented: “The mini-Budget came at the worst time. Sales activity tends to drop towards the end of the year anyway, and the mini-Budget meant transactions dropped even more sharply. People are now making offers as low as possible to get the best deal. Unfortunately, I can’t see much activity in December. However, estate agents will need to polish their negotiating skills for January as many buyers will offer 15% lower than the asking price. By then, sellers will be seriously reevaluating how much their house is worth in the market.”
Tom Bill, head of UK residential research at Knight Frank, said: “House prices in November moved sharply in the opposite direction to mortgage rates, which spiked following the mini-Budget. The slightly confusing message for buyers and sellers is that mortgage rates should continue to edge down even as the Bank of England raises the base rate. However, even as the financial pain becomes less acute in coming months, we expect it to become more widespread as more favourable mortgage offers made before the mini-Budget lapse. This should take house prices back to where they were in the summer of 2021, erasing around half of the 20%+ gain they made during the pandemic.”
Nicky Stevenson, MD at Fine & Country, said: “Rising interest rates have stretched buyer affordability and caused prices to cool.
“Amid the current cost-of living crisis, people are having to spend more time than ever managing household balance sheets, and many will be reluctant to add to the challenges they already face by taking on high-interest debt. Inflation is expected to peak by the end of 2022 before falling back to around 3.4% over the course of 2024.
“While the mortgage market is now beginning to stabilise following the turmoil caused by the mini-budget, there remains an expectation that the Bank of England will continue to nudge its base rate higher as it seeks to tame inflation. Swap rates have returned to levels lower than in the immediate aftermath of the Growth Plan but the consensus is that mortgage rates of between 5% and 6% may become the norm.
“Against this backdrop, we expect momentum in the housing market to remain subdued as we approach the New Year.”
Iain McKenzie, CEO of The Guild of Property Professionals, commented: “The figures confirm what the industry has been seeing on the ground – house prices are falling, but not at the dramatic rate we might have expected after the recent economic upheaval.
“It’s important to keep a sense of perspective and remember that property prices soared massively during the pandemic, meaning that these decreases are minor in comparison. The average home is still worth £45,000 more than it was in March 2020.
“The limited supply of housing is one of the main factors keeping the reins on falling prices. The unprecedented demand we have seen in the last couple of years has meant that estate agents have been scrambling to replenish their stock.
“The cost of living crisis will be the determining factor to control house prices in the months ahead. Mortgage affordability, as well as living costs, will affect how confident buyers are when it comes to committing to buying a new home.
“With nearly one in three property purchases ‘needs-based’ due to changing personal circumstances, the market will not grind to a halt, but pricing will be paramount to achieve a sale as the market swings back in the favour of buyers.”