UK house prices suffer biggest annual drop in 12 years: Halifax

July 07, 2023 (MLN): British house prices fell last month in annual terms at the fastest rate in 12 years and soaring interest rates are likely to herald more weakness in the housing market, mortgage lender Halifax said on Friday as Reuters reported.

House prices dropped 2.6% year-on-year in June, after a 1.1% fall in May, Halifax said. It was the largest such fall since June 2011.

On the month, prices fell 0.1% after a 0.2% monthly drop in May.

Kim Kinnaird, director of Halifax Mortgages, said the large annual drop reflected the comparison with a peak in house prices seen around a year ago, with relatively little movement in prices over the last few months.

But rocketing mortgage costs - spurred by rising expectations for Bank of England interest rates as it battles inflation - pointed to weaker months ahead.

"How deep or persistent the downturn in house prices will be remains hard to predict," Kinnaird said, adding that falling inflation could offer some support.

"With markets now forecasting a peak in Bank Rate of over 6%, the likelihood is that mortgage rates will remain higher for longer, and the squeeze on household finances will continue."

Investors bet on Thursday that stubborn inflation would force the Bank of England to raise interest rates to a 25-year high of 6.5% by December.

Lenders, including Lloyds Bank (LON: LLOY) subsidiary Halifax and other high street names, have repeatedly re-priced home loan offerings in recent weeks in a scramble to keep up with soaring funding costs.

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