UK house prices drop 0.6% in October, marking steepest decline in over three years

UK house prices fell 0.6% in October, bringing the average price of a typical property to £296,285, the steepest monthly decline since Lloyds recorded a 1.6% drop in August 2023. The fall marks the fourth consecutive month of price decreases and a 1.2% drop compared with October last year, the biggest annual decline since October 2023.

Analysts had forecast a modest 0.1% rise for the month, which would have been the first increase since June. Lloyds mortgages director Andrew Asaam said the market is being tested by a challenging economic backdrop, adding that renewed inflationary pressures linked to the Middle-East conflict are keeping borrowing costs high and tightening household finances.

Borrowing costs remain elevated, with Moneyfacts reporting an average two-year fixed mortgage rate of 5.97% and a five-year fixed rate of 5.99%. The figures were released a day after the Bank of England’s monetary policy committee raised the base rate by a quarter of a point to 4%, the first increase in three years, in an effort to curb inflation.

The conflict in the Middle East has pushed oil prices above $100 a barrel, contributing to higher fuel costs and lifting inflation to 3.5% in September. Antony Roberts estate agency head of sales Amy Reynolds noted that market momentum has slowed as the year ends, with buyers remaining cautious, especially those remortgaging or seeking a larger home.