House prices in London fell at a faster rate last month, as homeowners in the capital continue to bear the brunt of the property market slowdown caused by the Iran war.
The average house price in London fell by 2.2 per cent to £531,548 in the year to September, according to the Lloyds house price index, marking a worse drop than August’s 1.5 per cent.
Across the UK, house prices were unchanged in the month to September as well as year on year, marking an improvement from last month’s 0.3 per cent drop in values.
London’s house price slump was closely followed by the South East, where prices fell by 2.1 per cent year on year to £380,829. In eastern England, the average house value fell by 1.6 per cent to £330,151.
House prices in London and southern England have been falling this year, as property experts warn that the regions property markets are being worst hit by rising mortgage rates and stamp duty.
Andrew Asaam, mortgages director at Lloyds, said the UK’s property market is still “subdued,” despite avoiding another drop in average house prices.
Mortgage rates have jumped up since the US and Israel’s invasion of Iran in February. Earlier this week, the average five-year mortgage rate broke the six per cent mark for the first time in three years.
Last week’s surge in global borrowing costs had prompted a swathe of lenders, including Barclays, HSBC and Lloyds, to hike their rates, according to Moneyfacts.
Housing market ‘needs impetus’
Asaam said: “While the market overall has been fairly subdued, property prices have so far proved resilient during a period of higher mortgage rates, which has been driven by changing expectations around the future path of Base Rate.
“That’s mirrored in wider economic data, with household spending holding up better than many expected despite energy and other cost pressures arising from the Middle East conflict.”
Money markets have tipped the Bank of England to hike interest rates as many as four times by the summer next year, with most economists expecting a hike this month.
Jason Tebb, president of homes portal On The Market, said: “With house prices unchanged in September, there is an element of caution combined with continued underlying demand as focused buyers and sellers returned from holiday keen to proceed with their moves before the end of the year.
“All eyes will be on the budget later this month to see what the new Prime Minister and Chancellor have planned. We already know that there will be assistance for first-time buyers buying new-build homes and hope that on balance the budget provides some much-needed impetus for the housing market, as well as the wider economy.”
Last week, Andy Burnham announced a new equity loan scheme for first-time buyers. It is hoped that this will stimulate the UK’s flagging housing market, though economists have warned that the country’s struggling housebuilders still need help with rising costs and red tape.
