Average UK house price falls to £258,297

house price  Estate agents' boards are seen in south London, Tuesday Feb. 17, 2009. British homeowners are returning to the property market looking to pick up bargains following recent house price falls, research showed Tuesday. (AP Photo/Matt Dunham)
UK annual house price growth slows to 1.1%. Photo:Matt Dunham/AP

House prices fell for the fifth month in a row with the average sale price dropping to £258,297 in January as higher borrowing costs shun away prospective buyers.

Annual house price growth slowed to 1.1%, from 2.8% in December, and the typical property value is now 3.2% lower than its August peak, Nationwide Building Society said.

Property values fell 0.6% in January from December, following a 0.3% drop in December.

The average home is now worth £258,297, down from £262,068 a month ago.

Robert Gardner, Nationwide’s chief economist, said: “There are some encouraging signs that mortgage rates are normalising, but it is too early to tell whether activity in the housing market has started to recover.

“The fall in house purchase approvals in December reported by the Bank of England largely reflects the sharp decline in mortgage applications following the mini-budget.

Read more: Bank of England set to raise interest rates to 4%

“It will be hard for the market to regain much momentum in the near term as economic headwinds are set to remain strong, with real earnings likely to fall further and the labour market widely projected to weaken as the economy shrinks.”

He added: “Should recent reductions in mortgage rates continue, this should help improve the affordability position for potential buyers, albeit modestly, as will solid rates of income growth, especially if combined with weak or negative house price growth.

“Nevertheless, the overall affordability situation looks set to remain challenging in the near term.”

It comes as mortgage rate approvals declined in December to their lowest level since the start of the pandemic.

Mortgage approvals dropped to around 35,600 in December from 46,200 in November, according to figures from the Bank of England (BoE).

It is the lowest monthly reading since May 2020, when the housing market was shut because of the COVID lockdowns. It is also the fourth consecutive monthly decrease in mortgage approvals.

Jeremy Leaf, a north London estate agent, said: “The fizz has certainly left the market, leaving behind more serious needs-driven as opposed to discretionary buyers, coming to terms with more stable mortgage rates and greater balance between supply and demand.

“Looking forward, the outlook for house prices remains fairly steady with no expectation of any dramatic change.”

Read more: UK mortgage approvals slump amid higher borrowing costs

Gabriella Dickens, a senior UK economist at Pantheon Macroeconomics, said: “Nationwide’s data show that house prices are continuing to buckle under the pressure of elevated mortgage rates, squeezed real incomes and weak consumers’ confidence.”

Phil Gamblin, founder of Cardiff-based mortgage broker Oak Financial, said: “We’ve seen a large number of inquiries from home-buyers and re-mortgagers alike, suggesting that the turmoil felt at the end of 2022 is dying down and confidence is returning to the market.”

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