House prices may fall by up to four per cent in 2024 the Halifax is warning.

Its Outlook for 2024 report says pressure on household finances – notably from inflation and higher interest rates – has impacted housing affordability, and only a partial recovery is predicted next year.

The review says the average house price is now £283,615, compared with £286,328 a year ago – a fall of £2,713 or 1.0 per cent.

Property prices for homes bought by first-time buyers recorded a marginal 0.5 per cent rise over the past year, but existing owners moving house paid an average of 1.7 per cent less.

Northern Ireland saw the highest rate of annual property price inflation of any UK region or nation in the year to November 2023, at 2.3 per cent.

The South East of England recorded the biggest decrease, down by 5.7 per cent.

Halifax Mortgages director Kim Kinnaird says:“UK property prices held up better than expected over the last year.

“…This resilience – which owes more to the shortage of available properties for sale than strength of demand among buyers – means average house prices end the year just 3.0 per cent down on August 2022’s peak (£293,025) but £44,000 above pre-pandemic levels.

“Looking ahead, now that inflation is falling back, financial markets are pricing in cuts to Base Rate during 2024.

“Mortgage rates are already falling, with a typical five-year fixed 75 per week loan-to-value deal now below 5.0 per cent having been as high as 5.7 per cent as recently as July. All being equal, these rates are expected to fall further over the coming months.

“However, while pay growth is now above inflation – beginning to ease the cost of living squeeze for some – other factors will continue to weigh on households’ spending power next year.

“Economic growth is expected to remain weak, with unemployment rising and frozen tax thresholds limiting any increase in take home earnings.

“Overall, with the combination of cost of living pressures and interest rate levels that are still much higher than even two years ago, we will likely see continued mild downward pressure on house prices.

“Our latest forecast suggests a fall of between 2.0 and 4.0 per cent in 2024, though it should be noted, as with recent years, forecast uncertainty remains high given the current economic environment.”