House prices fell in the quarter to February according to the latest snapshot from Halifax, confirming the impression of a weakening market in the wake of the recent interest rate rise from the Bank of England and the approach of Brexit.
The lender reported on Wednesday that prices fell 0.7 per cent in the quarter, the first decline since the 0.2 per cent contraction in May 2017.
On an year-on-year basis prices prices were up 1.8 per cent in the quarter, slowing from the 2.2 per cent growth rate in January and the weakest rate of expansion since March 2013.
Before the June 2016 Brexit referendum UK house prices were rising at an annual rate of 10 per cent, according to the Halifax measure.
In November the Bank of England hiked interest rates for the first time in a decade, lifting its benchmark borrowing rate from 0.25 per cent to 0.5 per cent.
“Even the modest rise in mortgage rates over the last few months has hit the market hard,” said Samuel Tombs of Pantheon, adding that the expiry of the post-Brexit vote Bank of England support programme for lenders called the Term Funding Scheme would likely push up mortgage costs further.
“The rise in mortgage rates will be the dominant influence on the market, depressing demand and ensuring that house prices merely hold steady this year.”
The Halifax figures accord with the impression from recent Royal Institution of Chartered Surveyors (Rics) surveys, which reported that the net balance for new buyer enquiries in January was –11 per cent, the 10th month in a row that the reading has been negative.
However, although the number of mortgage approvals for UK homebuyers fell to a four-year low in December, it bounced back in January, according to the latest data from lenders.