Halifax House Price Index: House price growth dips for first time in a year

Alice Haine, Personal Finance Analyst at Bestinvest, the DIY investment platform and coaching service, commented:

“With inflation predicted to hit 13% by the end of the year when the Bank of England expects the economy to enter a year-long recession triggered by surging energy bills, it was only natural to assume property prices would start to cool too.

“As the latest Halifax House Price Index shows, prices dipped slightly in July, falling 0.1% on the month, the first decrease since June 2021. But with prices still up 11.8% on the year it still highlights just how resilient the UK property market has been in recent months to the wider economic gloom sweeping the country.

“While buyer enquiries are starting to slow, the market’s relative buoyancy is being driven by high employment levels and the low number of properties hitting estate agents’ books, meaning buyers are still forced to battle it out to secure their dream home.

“With some homeowners now more reluctant to sell, as they delay any plans to upsize or downsize for fear of being hit by higher mortgage rates, low supply levels have exacerbated this scenario.

“Existing homeowners have been able to revel in their newfound wealth up until now, as their property value appeared to soar higher every month on paper, but spare a thought for Britain’s army of tenants.

“While prices may have dipped slightly in July, they are still more than £30,000 higher than this time last year, meaning renters looking to buy still need to raise a bigger deposit than planned to secure their first home while also facing more expensive mortgage deals and rising rents to boot.

“It’s only a matter of time, however, before the pace of rising prices takes a bigger swipe at the property market. Once a recession digs in, then the threat of job losses will raise its ugly head – damaging buyer confidence and dampening the market in the process.

“The real turning point could be the BoE’s decision yesterday to hike interest rates to 1.75% yesterday - the sixth interest rate rise since last December and the biggest jump since 1995 – as the Central Bank strived to choke off the worst bout of inflation in 40 years.

“It would therefore only be natural for prospective buyers to pause purchasing plans for now. Consumers took on an extra £1.8 billion in unsecured debt in June, according to BoE data, indicating that households may be more focused on meeting everyday bills than looking for a new home.

"Mortgage approvals also fell by more than expected in June to 63,700 from 65,700 in May – perhaps the clearest sign that momentum in the market is slowing.

“With real incomes being eroded by runaway price rises, there is considerable uncertainty ahead for households across the country and that must mean the property market is finally going to fall in line with the rest of the economy.

“How well the market holds up during the coming recession will depend on how much homeowners have adjusted their finances to account for rising mortgage rates. With most mortgage holders on fixed-rate deals, the timing of when those deals expire will become key going forward. With rates set to go even higher this year, lock in new deals now to protect your finances while you still can.”