UK house prices latest: are house prices going down?

Will UK house prices fall in 2023? Katie Binns explains the latest house price trends, mortgage deals and if now is a good time to buy or sell a home

Colourful London townhouses at sunset
(Image credit: Getty images)

UK house prices fell 0.6% in January, according to Nationwide, with the average house price now £258,297, down from £262,068 in December.

The fall is the fifth in a row for Nationwide and is the latest indication that the property market is slowing down in the face of the cost of living crisis and higher mortgage rates.

Meanwhile, fewer people have been moving house in the first few weeks of 2023 than at any time since January 2018, according to Zoopla (opens in new tab), indicating many buyers are holding off buying a new home.

The latest report from the online agent also shows flats appear to be making a comeback, with demand for one- and two-bed flats increasing by five percentage points compared to the same period in 2022, and demand for three-bed houses equally falling back.

It points to buyers looking for value: the average two-bed flat outside of London listed on Zoopla is almost £100,000 cheaper than the average three-bed house, with one-bedroom flats being £150,000 cheaper.

Zoopla forecasts UK house prices will likely fall by 5% this year while the Office for Budget Responsibility (OBR) predicts that they will fall by 9% over the next two years.

Good news for potential buyers, who may feel they are getting mixed messages after seeing the latest from Rightmove - it has seen a rise of 0.9% in house prices, adding an extra £3,301 to the average price tag on a home in January (opens in new tab)

The property website says a rise in asking prices would normally be expected in January.

Tim Bannister, Rightmove’s director of property science, points out: “While average asking prices did rise in January, they are still £8,720 less than their peak in October."

Here we explain current property prices, what mortgage deals are available and if now is a good time to buy a home.

UK house prices latest

House sales and prices

It’s a mixed picture for homebuyers.

The latest base rate rise by the Bank of England from 3% to 3.5% will theoretically translate into higher mortgage rates: lenders tend to pass on the latest increases in the base rate to customers taking out new fixed deals. 

Yet mid-January has seen high street lenders such as HSBC and Santander cut interest rates on fixed-mortgage products to a three-month low - two-year fix deals are down to around 5.5% after having peaked at more than 6.6% at the end of October.

For sale sign outside brick terraced houses

The choice of mortgage products is gradually increasing again, but first-time buyers must now quadruple their deposits to get onto the housing ladder.

(Image credit: Getty images)

In other good news, the choice of mortgage products now exceeds the number available on the day of the mini-budget in September 2022: Moneyfacts counted 4,385 deals on 31 January - more than the 3,961 deals that were available on 23 September - suggesting the mortgage market has significantly recovered from the chaos unleashed by the mini-budget.

There are also efforts to help first-time buyers secure home loans with small deposits, the Treasury is planning to extend its mortgage guarantee scheme (opens in new tab). The scheme, which has helped 21,000 first-time buyers so far, allows lenders to buy an insurance policy from the government for mortgage loans taken out by homebuyers with a deposit of less than 10%.

And in an attempt to help those who want to get a mortgage for a property with cladding: Barclays, HSBC, Lloyds, Nationwide, NatWest and Santander have opened mortgage applications to medium to high-rise homes with cladding. 

In other good news for buyers, around one million homes across the UK have now had all the gains in value made during the coronavirus pandemic wiped out in recent months, according to Zoopla.

Overall, house prices are expected to fall over the next few months: buyers will find it more difficult to borrow money or decide increasing mortgage rates are simply too expensive. This will force sellers to list their properties at lower prices.

But, two-thirds of economists expect house prices to fall by more than 4%, with most warning of near-double-digit declines, according to a survey by The Times (opens in new tab). This would make 2023 the worst year for the housing market since 2009.

What is the average UK house price?

Each month, Nationwide, Halifax and Zoopla release figures on the growth of average house prices.

  • Nationwide (opens in new tab) put the average house price at £258,297, in January 2023. This is down 0.6% since December - annual house price growth slowed to 1.1%, down from 2.8% in December.
  • Halifax (opens in new tab) put the average house price at £281,272 in December 2022. This is down 1.5% since November - and annual house price growth slowed from 4.7% to 2%.
  • Zoopla (opens in new tab) put the average house price at £261,200 in December. The online estate agent recorded a slowdown in growth from 8.3% at the end of 2021 to 6.5% in December 2022. 
  • Rightmove (opens in new tab) puts the average house asking price at £362,438 in January 2023. This is up 0.9% from £359,137 since the previous month.
  • UK House Price Index (HPI) (opens in new tab) puts the average house price at £295,000 in November 2022. This is up 10.3% from the previous year. The UK House Price Index (HPI) publishes later than the others and uses house sales data from HM Land Registry, Registers of Scotland, and Land and Property Services Northern Ireland and is calculated by the Office for National Statistics.

Property expert Henry Pryor (opens in new tab) explains how we should view these house price estimates: “Every index says house prices are rising despite common sense suggesting that they must soften - but indices don’t lie. They also don’t tell the future. They tell us what buyers and sellers were doing up to six months ago - and like the weather, it feels things are a little cooler than they were.”

Is now a good time to buy a property?

Buying a home is likely to be the biggest financial commitment of your life. Potential homebuyers need to go into the buying process with their eyes wide open to current conditions in the property market.

Myron Jobson, senior personal finance analyst, interactive investor, says: “It’s worth remembering that even though house price inflation has come down, it doesn’t mean that prices are falling. It just means that home prices aren’t rising as fast."

If you’re a homebuyer, you need to be aware that:

  • Lenders are now decreasing mortgage rates after they peaked on 20 October but deals are still expensive, with the typical two-year fixed 5.45% and a typical five-year now 5.2% as of 31 January, according to data analyst Moneyfacts.  
  • The Bank of England expects inflation and interest rates will peak this year - to 4.5% - before falling to below 2% by 2026. It means short-term fixes may be the way to go rather than fixing for more than five years.
  • Lenders tighten affordability tests during a recession as they factor in higher energy and food prices and reduced disposable income. It means lenders are cutting the maximum they will lend a prospective homebuyer or homeowner looking to remortgage. 
  • Banks are limiting the number of first-time buyer mortgages: The number of mortgages requiring a 5% deposit dropped from 283 on September 23 (the day of the mini-Budget) to 154 as of 31 January. 
  • TSB has also stopped lending to borrowers in new-build homes with 10% deposits, mainly first-time buyers, amid concerns of potential price falls of up to 10%.
  • Tracker mortgages have become more popular amid high fixed rates. Most trackers do not have early repayment charges, so you can switch deals easily without penalty.
  • Negative equity - when a home is worth less than what you borrowed to pay for it - is possible. It means if you have a mortgage loan for more than 90% of the value of your home and prices fall by 10% or more, this could wipe out the value of your deposit and leave you in negative equity. Around 90,000 first-time buyers who bought homes in 2020 and 2021 are at risk of this, according to research by The Telegraph (opens in new tab). It means it’s a good idea to buy with as big a deposit as possible.
  • Sellers have been accepting offers 3% below their asking price in November, according to Zoopla, with one in nine homes having their original asking price reduced by 5% or more since the start of September.
  • Off-market sales have become mainstream.
  • Location always affects affordability. Average property prices in certain parts of the UK are genuinely affordable: In Middlesbrough’s T1 postcode the average house price is £54,978, in Bradford’s BD1 postcode a property can be bought for an average of £58,673 while in Shildon in County Durham, you’ll pay £74,000 for a property.
  • First-time buyers still have it hard: even if house prices fell by 18%, nearly three-quarters of 25-to-34-year-old non-home-owning families would have neither the savings nor the earnings to be able to buy a house, according to the Resolution Foundation

House prices

Off-market sales have become more popular, with one in ten homes now sold privately (one in five in London), according to Hamptons estate agency.

(Image credit: Getty Images)

To buy or not to buy? If you need and can afford to buy a home now, you might have the financial resilience to submit yourself to the challenging conditions we’ve cited. 

Finance expert Martin Lewis says that while there are "so many variables”, buyers need to be fully prepared. "If you've got a decent deposit, and you've found a house that you love, and you've got a mortgage that is affordable for you, and you're going to stay in that property for a long time, get on with it, buy your house."

If you’re unsure, you may be better off waiting. Alice Haine, Personal Finance Analyst at Bestinvest (opens in new tab), says: “Overstretching yourself and taking on a high loan-to-value mortgage now could be a very risky move. The last thing anyone wants to deal with is negative equity, where the house is worth less than their home loan, particularly during a recession when job security is in peril.” 

Will house prices fall in 2023?

There is no agreement between industry experts on how far house prices will fall in 2023, or for how long.

  • Zoopla expects property prices to fall by 5% in 2023
  • Estate agency Knight Frank, predicts house prices will fall 5% in each of the next two years 
  • NatWest Group forecast that house prices will drop by 7% in 2023
  • Halifax expects property prices to fall 8% in 2023
  • The Office for Budget Responsibility (OBR) predicts that property prices will fall by 9% over the next two years
  • Savills predict that property prices will fall by 10%, then rise again after a year 
  • Credit Suisse forecasts a drop of between 10% and 15% in 2023
  • Lloyds bank predicts house prices will likely fall 9% over the 12 months but in the worst-case scenario, prices could fall up to 18%.

We asked property experts if they think house prices will fall.

Yes - but double-digit drops that some are predicting are unrealistic, says Marc von Grundherr, Director of London lettings and estate agent, Benham and Reeves (opens in new tab). “A further increase to interest rates will certainly spur a continued cooling in current property values but it’s extremely unlikely we will see the deep freeze that many may lead us to believe. At most, we can expect a five per cent drop during the first six months of the year, at which point stability will return and house prices will start to level out. 

A double-digit fall is not out of the question, says Chris Hodgkinson, managing director of House Buyer Bureau (opens in new tab). “While there’s no need to buckle up for a house price crash, we can confidently expect property values to decline quite significantly over the coming year, with a double-digit decline unlikely, but certainly not out of the question. Those entering the market to sell will still be able to find a buyer due to the shortage of stock available. But while a continued imbalance between supply and demand will allow them to sell, they will no longer hold the power where negotiations are concerned and will find the hefty premiums secured during the pandemic market boom are no longer on the table.”

Yes, perhaps around 10%, says Ray Boulger, senior mortgage technical manager at John Charcol: “I think we can expect to see a significant fall in house prices, perhaps around 10% next year. The key factor is how much people can afford on their monthly mortgage. With the cost shooting up so far a lot of people thinking of buying are going to rethink those plans. They may not buy at all. If they are going to buy, they will buy at a lower level.”

Yes, at a faster rate than they already are, says Jamie Lennox, director at Norwich-based mortgage broker, Dimora Mortgages (opens in new tab): "The cuts to the capital gains allowance threshold [in the Autumn Statement] could be the final nail in the coffin for small buy-to-let owners. They're already facing rising rates and the reality is that they can't borrow enough on a remortgage to switch lenders. This could lead to a huge sell-off from landlords that could lead to house prices dropping at a faster rate than they already are." 

House price falls are not that alarming if you think about it, says Nathan Emerson, chief executive at Propertymark. “If you dig under the surface, prices are really not as alarming as they seem. Although house prices are coming down, they are still between 19% to 20% higher than in March 2020. This means that even with a further 10% drop next year being predicted, most homeowners will still have gained a 10% rise in the value of their property since before the pandemic.

How can I find the right mortgage for me?

As lenders continue to increase their mortgage rates, check out our regularly updated best mortgage deals. You can also seek guidance from comparison websites like Go Compare (opens in new tab)

There are also ways to temporarily lower your mortgage bill too. 

  • Ask your lender about the possibility of a payment holiday for some months. Again it will cost you in the longer term but may be suitable for you in the shorter term while you navigate the cost of living crisis.
  • Extend your term. Mortgages are usually set at 25 years. If you increase this to 35 years this will lower your monthly mortgage payments - but it will cost you more overall in the long term as you will be paying interest for longer.
  • Switch to an interest-only mortgage. Again this saves you money in the short term but adds to your loan in the long-term

Other ways to find the right mortgage for you include:

  • Speak to a mortgage broker who is able to search the whole market and access exclusive deals rather than one who is restricted to a small number of lenders. Do check what fee they charge first. 
  • Improve your chances of getting a better rate by improving your credit score if necessary and limiting your spending in the months beforehand to make any loan application look more affordable. If self-employed, gather all your paperwork for a smooth application. 
  • Use our simple mortgage calculator to work out exactly how much you can borrow.

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Katie Binns

Katie is staff writer at The Money Edit. She was the former staff writer at The Times and The Sunday Times. Her experience includes writing about personal finance, culture, travel and interviews celebrities.  Her investigative work on financial abuse resulted in a number of mortgage prisoners being set free - and a nomination for the Best Personal Finance Story of the Year in the Headlinemoney awards 2021.