UK house prices ended 2023 down 1.8 per cent compared with December 2022, leaving them almost 4.5 per cent below the all-time high recorded in late summer 2022. 

This is according to the Nationwide which says prices were flat in December compared with November, after taking account of seasonal effects.

Nationwide’s chief economist Robert Gardner says: “Housing market activity was weak throughout 2023. The total number of transactions has been running at circa 10 per cent below pre-pandemic levels over the past six months, with those involving a mortgage down even more – circa 20 per cent – reflecting the impact of higher borrowing costs. 

“On the flip side, the volume of cash transactions has continued to run above pre-Covid levels.

“Even though house prices are modestly lower and incomes have been rising strongly, at least in cash terms, this hasn’t been enough to offset the impact of higher mortgage rates, which in recent months were still more than three times the record lows prevailing in 2021 in the wake of the pandemic.

“As a result, housing affordability has remained stretched. 

“A borrower earning the average UK income and buying a typical first-time buyer property with a 20 per cent deposit would have a monthly mortgage payment equivalent to 38 per cent of take-home pay – well above the long run average of 30 per cent.

“At the same time, deposit requirements remain prohibitively high for many of those wanting to buy – a 20 per cent deposit on a typical first-time buyer home equates to 105 per cent of average annual gross income – down from the all-time high of 116 per cent recorded in 2022, but still close to the pre-financial crisis level of 108 per cent.”