A prominent analyst says the threat of rising inflation caused by the Red Sea shipping attacks – on top of this week’s surprise rise in inflation anyway – has put the brakes on speculation about Bank of England base rate cuts.

Sarah Coles, head of personal finance at business consultancy Hargreaves Lansdown, says: “Mortgage rates reached a peak in August, and many struggled to be able to borrow as much as they needed. Over this period, sales ground to a halt, so an awful lot of sellers were forced to cut their prices in order to shift their home. Even as prices fell, buyers sat on their hands, and the RICS survey showed that buyers were still thin on the ground in November.

“There is a small glimmer of hope, because mortgage rates have continued to drop, and the average two-year rate has fallen to 5.62 per cent, according to Moneyfacts – a full percentage point lower than it was four months ago. Even the big lenders are offering rates below 4.0 per cent. It means we could see a small pick-up in demand when the figures for December and January come in.

“However, sellers shouldn’t get too excited just yet. This week’s surprise rise in inflation [from 3.9 to 4.0 per cent] combined with concerns about oil prices and the supply of goods as a result of conflict in the Red Sea, could put the brakes on mortgage rate cuts. 

“When you consider the risks facing the world economy, and the fact the UK economy is teetering on the brink of recession, there’s every chance that the property market has some seriously tricky months on the way, and this may not be the last of the price falls we see in 2024.”

Other bad news for the housing market has come from the government’s official house price data which now shows that average house prices across the UK were down 2.1 per cent in the year to November. They had fallen 1.3 per cent in October, and this is the third consecutive month of falls.

It’s also the fastest annual drop since 2011.

On a seasonally adjusted basis, prices fell 0.4 per cent in a month and the average house price dropped to £285,000 – down £6,000 in a year.

House price movements ranged from a drop of 0.4 per cent in the North East to a fall of 6.0 per cent in London. The highest average price was in London, at £505,000, but with a drop of 6.0 per cent in a year, London saw the fastest annual fall since 2009.

All property types fell in price, with terraces down 3.8 per cent and flats down 1.8 per cent.