UK house prices drop sharply in largest fall since June 2020

House prices fell 0.9 percent month-on-month in October, after taking account of seasonal effects. This is the first such fall since July 2021 and the largest since June 2020. The average house price has also fallen from a UK average of £272,259 in September 2022 to £268,282 in October 2022.Commenting on the latest figures, Robert Gardner, Nationwide’s Chief Economist, said the property market has been impacted by the mini-Budget which led to a sharp increase in interest rates.He continued: ‘Higher borrowing costs have added to stretched housing affordability at a time when household finances are already under pressure from high inflation.’For example, the increase in mortgage rates meant that a prospective first-time buyer (FTB) earning the average wage and looking to buy a typical FTB home with a 20 percent deposit would see their monthly mortgage payment rise from c.34 percent of take-home pay to c.45 percent, based on an average mortgage rate of 5.5 percent.’This is similar to the ratio prevailing before the financial crisis. The market looks set to slow in the coming quarters.’Inflation will remain high for some time yet and Bank Rate is likely to rise further as the Bank of England seeks to ensure demand in the economy slows to relieve domestic price pressures.READ MORE: Simple remedies to prevent black mould around windows UK house prices drop in largest fall since June 2020 as outlook remains ‘uncertain’ (Image: GETTY)’The outlook is extremely uncertain, and much will depend on how the broader economy performs, but a relatively soft landing is still possible.’Longer term borrowing costs have fallen back in recent weeks and may moderate further if investor sentiment continues to recover.’Given the weak growth outlook, labour market conditions are likely to soften, but they are starting from a robust position, with unemployment at near 50-year lows.’Moreover, household balance sheets appear in relatively good shape with significant protection from higher borrowing costs, at least for a period, with over 85 percent of mortgage balances on fixed interest rates.’Stretched housing affordability is also a reflection of underlying supply constraints, which should provide some support for prices.’DON’T MISS’Cheaper’ time to run washing machines to save money on laundry [INSIGHT]ITV News At Ten’s Tom Bradbury’s quiet life in rural Hampshire town [UPDATE]’Golden rule’ for pruning lavender before winter – what to ‘never’ do [ANALYSIS] House price forecast (Image: EXPRESS)Nathan Emerson, Chief Executive of Propertymark, the UK professional body for estate agents, said agents are also reporting more homes for sale which is giving buyers more choice compared to the last two years.He added: ‘They no longer have a fear of losing out on a property and can therefore be more level-headed with the offers they’re putting forward, which will naturally see a softening in prices being achieved over the next few months.”Director of Benham and Reeves, Marc von Grundherr, said a reduction in house price growth should be ‘largely welcomed’.’The monumental levels of house price appreciation seen throughout the pandemic market boom just simply aren’t sustainable and it’s far better the market steadily returns to normality, rather than crashing back down to earth with a bump,’ he added.