'Wake-up call': Yorkshire house price drop revealed in advance of new interest rate rise

The average property price in October is £296,285, marking a £1,882 or 0.6 per cent fall compared with September.

In Yorkshire, a one per cent reduction was recorded – taking average prices down to £214,485.

Andrew Asaam, mortgages director at Lloyds, said: “Housing demand is currently being tested by a challenging economic backdrop.

“Renewed inflationary pressures, driven in part by the conflict in the Middle East, are keeping borrowing costs high and adding to the squeeze on household finances, making some buyers understandably more cautious.

“However, it’s important to put October’s fall in context.

“House prices have changed relatively little over the past couple of years, as the market has gradually adjusted to higher interest rates.

“The recent rise in energy and other household costs has added to the pressure on buyers, so some adjustment in prices is not surprising.

“Looking ahead, conditions are likely to remain subdued in the near term, but we don’t expect this to lead to a sustained period of falling house prices.

“With wages continuing to rise faster than property prices, the gap between earnings and house prices should gradually narrow, helping affordability to improve over time.”

On Thursday, the Bank of England base rate increased by 0.25 percentage points to 4 per cent, in the first rise in interest rates in more than three years.

Based on typical outstanding mortgage balances, UK Finance said the increase for homeowners on tracker deals would be £30.72 on average.

Around nine in 10 (87 per cent) outstanding homeowner mortgages are fixed rates.

Some 2.3 million fixed-rate deals are due to expire in 2027, according to the analysis by UK Finance.

Nathan Emerson, chief executive of property professionals’ body Propertymark said: “Renewed inflationary concerns and yesterday’s increase in the base rate will continue to weigh on consumer confidence, particularly as households remain mindful of the cost of living.”

Iain McKenzie, chief executive of The Guild of Property Professionals, said: “The latest figures should serve as a wake-up call for sellers who are still pricing their homes based on what they might have achieved at the height of the market.

“Buyers have more choice, borrowing costs are squeezing budgets and overpriced properties are finding it increasingly difficult to attract serious interest.”

David Hollingworth, associate director at L&C Mortgages said: “The drop in prices will do nothing to cheer homeowners and subdued house price inflation figures look likely to be a regular fixture in coming months.

“Mortgage rates have risen substantially since the outbreak of the Iran war, as fixed rates have reflected the market view that interest rates would need to rise.”

But he said some first-time buyers may find they have less competition, adding: “They will have time to consider their options and potentially negotiate a little harder.”