House prices fell 1.9 per cent in August and are down 4.6 per cent over the year, according to Halifax. 

It’s the biggest annual fall since 2009 and means the average house now costs £279,569 – down £14,000 from the peak.

However, this only takes us back to levels in 2022, and we’re still £40,000 above pre-pandemic levels.

Sarah Coles, head of personal finance at Hargreaves Lansdown, warns that there may be worse to come.

“Higher mortgages have an immediate impact on buyers, and while they have inched down from the peak, rates aren’t going anywhere in a hurry. It’s not just the buyers we have to worry about either. There’s also the insidious creep of remortgages as people come to the end of the fixed rate deal” she says.

Data from the Resolution Foundation shows the average mortgage rate held at the start of 2022 was 2.0 per cent and is expected to peak at 4.8 per cent at the end of 2027, but only half of that has filtered through into mortgages so far. 

“It means house price weakness could have a long tail” says Coles, adding: “You could see prices come down from here. If you wait long enough, you could also see some bigger drops in mortgage rates – although that will mean waiting a while.”

However last August – on which the Halifax annual price drop is based – was the peak of the market, so price drops won’t necessarily accelerate from here.