The UK housing market is remaining “more resilient than expected” despite the latest price index showing another small fall.

The Halifax say the average UK house price fell by 0.4 per cent in September, but it remains slightly higher than it was when the Bank of England started its 14 base rate rises. 

Property prices dropped by 4.7 per cent annually in September, with southern England continuing to be the weakest area with most significant price falls. 

The typical UK home now costs £278,601, which is more than £39,000 above pre-pandemic levels, despite being around £14,000 below a peak recorded in August 2022.

Kim Kinnaird – Halifax’s mortgage director – says: “Activity levels continue to look subdued compared to recent years, with industry data showing lower levels of new instructions to sell homes and agreed sales.

“Borrowing costs are the primary factor, given the impact of higher interest rates on mortgage affordability. Against this backdrop, homeowners inevitably become more realistic about their target selling price, reflecting what has increasingly become a buyer’s market.

“However, with base rate now likely to be at or around its peak, we are seeing fixed-rate mortgages deals ease back from recent highs. Wage growth also remains strong, which has helped with affordability, with the house price-to-income ratio now at its lowest level since June 2020 (at 6.2 in September).

“Many economists and financial markets predict that base rate will remain higher for longer, with any significant cuts appearing unlikely until inflation gets closer to the Bank of England’s two per cent target.

“Overall, these factors are likely to keep mortgage rates elevated in comparison to recent years, constraining buyer demand and putting downward pressure on house prices into next year.”

Tom Bill, head of UK residential research at Knight Frank, says: “The financial pain entering the system will continue next year as people roll off fixed-rate deals, but there will be an improvement in sentiment, that vital lubricant in the housing market.

“We therefore think most of the UK’s house price correction will happen this year and modest single-digit annual growth will return after the next general election.”

And Jeremy Leaf, a north London estate agent, adds: “Results confirm what we are seeing on the ground – business is bumping along at a new, lower level as buyers and sellers are encouraged partly by expectations of lower interest rates, and higher rents making refuge in the lettings market less likely, particularly for those taking their first steps on the ladder.”