The Halifax House Price Index showed UK house prices fell 0.4% from the prior month in October to £292,598.
It was the biggest drop in monthly house prices since February 2021 but annual growth remained strong at 8.3%.
“It is becoming increasingly clear that the growing affordability hurdle is stopping the runaway housing market in its tracks,” said Myron Jobson, Senior Personal Finance Analyst, interactive investor.
Rising mortgages rates are squeezing households and putting pressure on affordability, however, Kim Kinnaird, Director at Halifax Mortgages, believes mortgage rates may have already peaked, but warns of buyers sitting out the market.
“While it is likely that those rates have peaked for now – following the reversal of previously announced fiscal measures – it appears that recent events have encouraged those with existing mortgages to look at their options, and some would-be homebuyers to take a pause,” said Kim Kinnaird.
Analysts also said the entirely manufactured chaos around the mini-budget was a catalyst for falling prices last month.
“Mini-budget mayhem exacerbated house price misery, with prices dropping faster than they have in over 18 months. And with recession looming, there’s every sign that confidence is draining from the market,” said Sarah Coles, senior personal finance analyst, Hargreaves Lansdown.
“House prices have fallen for three months out of the past four. The housing market doesn’t always move in a straight line, but clearly a downward trend is developing. We’re not getting near the realms of price falls yet, with annual growth still at 8.3%, but given it has fallen back from a peak of 12.5% in June, it would be foolish to rule out significant annual price drops in the coming months.”
