Rapid Drops in Residential Property Prices at a 10-Year High

Halifax Announces 2.6% Decline in UK House Prices

In a recent announcement, Halifax revealed that the annual fall of UK house prices stands at 2.6%, equivalent to approximately £7,500 being wiped off the average UK house price. This marks the biggest decrease in UK house prices since 2011.

The decline in house prices largely reflects the impact of historically high house prices last summer. According to Kim Kinnaird, Halifax's director of mortgages, "the resulting squeeze on affordability will inevitably act as a brake on demand."

The drop in house prices should be seen in the context of a market that had little movement in prices recently. In fact, the volume of mortgage applications held up well throughout June, particularly from first-time buyers. However, the latest data from HM Revenue and Customs shows that there were 74,360 transactions in May, marking a 25% drop on the same month earlier.

Ms. Kinnaird also stated that the depth and persistence of the downturn in house prices is hard to predict. She added that the likelihood is that mortgage rates will remain higher for a longer period. As of now, the average two-year fixed rate mortgage has climbed to 6.54%, according to financial firm Moneyfacts.

Markets are forecasting a peak in Bank Rate (interest rate) of over 6%. Core inflation (which excludes energy and food prices) is proving to be stickier than originally expected. However, consumer price inflation is expected to decrease in the near term due to a predicted reversal of steep rises in energy and food prices.

The statement from Halifax suggests that rising mortgage rates and the decrease in house prices may affect demand for buying properties. This is supported by the fact that sellers in the UK reduced new property offer prices by an average of 1.3% in August 2025, with many sellers lowering prices amid a sluggish market. As of August 2025, the current average selling price for a house in the UK is approximately £368,740.

It's important to note that no specific predictions about the future direction of house prices or mortgage rates were made by Halifax or Ms. Kinnaird. However, the squeeze on household finances is expected to continue to put downward pressure on house prices over the coming year.

In conclusion, the current state of the UK housing market shows a decline in house prices, a rise in mortgage rates, and a sluggish market. While the future direction of these trends is uncertain, the current situation is putting pressure on household finances and may continue to do so in the coming year.