House prices are falling for the first time this year but experts warn that is because of the summer holidays

Home prices are falling for the first time this year…but experts say it’s just the holiday season, not the beginning of deflation

  • UK house prices fell 1.3% on average in August, the first decline this year
  • Rightmove says the drop is due to the summer holidays, not the cost of living
  • Demand is down, but a lack of homes available to buy is keeping prices high

House prices fell for the first time this year, falling 1.3 per cent in the past month and raising the cost of the median home to £365,173.

The drop follows successive rate increases by the Bank of England that have raised rates for new mortgages – but Rightmove said the drop was in line with the average drop in August over the past 10 years.

Summer holidays mean low demand during this period and sellers are forced to set prices competitively to attract interest.

Falling: Home prices fell 1.3% in the last month, according to Rightmove

Earlier this month, the Bank of England announced a 0.5 per cent increase in the base rate to 1.75 per cent – the biggest rise in 27 years – pushing rates for new fixed mortgages and variable mortgages even further.

Interest rates are putting additional pressure on the affordability of house prices, at a time when average monthly mortgage payments for new first-time buyers placing a 10 per cent deposit have exceeded £1,000 for the first time.

Rightmove said buyer inquiries to agents were down 4 percent from the same period last year, but still 20 percent higher than in 2019.

New listings are up 12 percent over the same period last year, but still down 6 percent compared to 2019, while available inventory is down 39 percent compared to 2019.

August marks 20 years of the Rightmove House Price Index, where in those 20 years the national average of prices has doubled (+134 per cent), from £155,994 to £365,173, outpacing both salaries and general inflation.

turning point?  This month saw the first decline in home prices this year with the median home down 1.3% compared to July

turning point? This month saw the first decline in home prices this year with the median home down 1.3% compared to July

Cost Increase: The amount first time buyers spend on their mortgage each month has reached £1,000 for the first time

Cost Increase: The amount first time buyers spend on their mortgage each month has reached £1,000 for the first time

Tim Bannister, Director of Property Science at Rightmove, said: “Many indicators point to continued activity in the market cooling off the highs of the past couple of years.

It’s possible that the effect of higher interest rates will gradually carry over through the remainder of the year, but for now, the data shows that they don’t have much effect on the number of people willing to move.

“Demand has softened somewhat and there is now more choice for buyers, but the two are still at odds and the size of this imbalance will prevent significant price drops this year.”

London is experiencing the biggest drop in prices

Regionally, London saw the biggest decline with prices down 3.5 percent in the capital, but year-on-year prices were up 5.2 percent. House prices in Wales rose this month, jumping 2.1 per cent to £261,117 for an annual increase of 10.6 per cent.

Jordan Yorath, partner at Monroe Estate Agents in Leeds, said: ‘So far in August we have been advising some clients in the higher value property sector to market their homes outside of the traditional summer holiday period.

After a long period where many people’s lives were restricted in terms of holidays and travel, we felt better that clients are seeking to launch their properties outside of August in particular, so that they can reach the maximum number of participating buyers when they come to market.

“July has been a really strong month for us and while some may be enjoying a summer break, we have been busy preparing for the rest of the year, with a slew of lists also ready for September onwards.”

Best mortgage rates and how to find them

Mortgage rates skyrocketed as the Bank of England’s base rate rose rapidly.

If you are looking to buy your first home, move or remortgage, or are a buy-to-let owner, it is important to get good mortgage advice from a broker who can help you find the best deal.

To help our readers find the best mortgage, This is Money has partnered with an independent, no-fee L&C broker.

The Mortgage Calculator backed by L&C allows you to filter deals to see which ones fit your home value and deposit level.

You can also compare different durations of mortgage rates, from two-year fixes, to five-year fixes and ten-year fixes, displaying monthly and total costs.

Use the tool at the link below to compare the best deals, factoring in fees and prices. You can also start an online application on your own time and save it as you move forward.

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