According to Halifax, house prices in the UK have fallen at the fastest rate in 12 years, accompanied by a continuous rise in mortgage rates. The lender stated that the annual decline of 2.6%

equated to an average reduction of £7,500 in UK house prices, marking the largest drop since 2011.

The figures indicate a downward trend, with prices falling for the third consecutive month in June by 0.1%, indicating a cooling market. The average cost of a property in the UK now stands at £285,932.

The data from Halifax coincides with findings released by financial firm Moneyfacts, which reveal that the average two-year fixed-rate mortgage has risen to 6.54%, representing a slight increase from the previous day.

Kim Kinnaird, Director of Mortgages at Halifax, highlighted that the resulting impact on affordability will inevitably slow down demand, as buyers assess what they can realistically afford. The duration and extent of the downturn in house prices remain uncertain.

The lender emphasized that this decline should be viewed in the context of a market that has seen minimal price movement in recent times. The current rate of decline is largely influenced by the impact of historically high house prices in the summer of the previous year when annual growth reached its peak of 12.5% in June 2022, supported by the temporary Stamp Duty cut.

Although mortgage applications remained steady in June, especially from first-time buyers, the persistence of core inflation, even as energy and food prices are expected to stabilize, indicates that mortgage rates are likely to remain higher for an extended period. Consequently, household finances will continue to exert downward pressure on house prices in the coming year.

Compared to a year ago, the housing market has experienced a significant shift, with activity currently stagnating. HM Revenue and Customs data reveals a 25% decrease in transactions in May, amounting to 74,360 compared to the same month the previous year.

Adam Smith, founder of Alfa Mortgages, predicted that the strain on individuals' finances would likely push prices lower in the months ahead. However, due to limited supply and the strength of the job market, the housing market may experience a correction rather than a crash in the next 12 months.

Last month, Nationwide reported that UK house prices had also experienced their sharpest annual decline in almost 14 years, with prices dropping by 3.4% in the year leading up to May, the most substantial decline since July 2009.