While parts of northern England continue to see modest property growth, the capital has emerged as the sharpest casualty of rising mortgage costs in the latest housing data.
Average house prices in London tumbled 3.1 per cent over the year to October, leaving a typical home in the capital valued at £524,892, according to the Lloyds house price index.
That stands in stark contrast to the North East and North West of England, where prices grew by 2 per cent and 2.2 per cent respectively over the same period.
Nationally, the picture darkened considerably, with the average UK house price declining 1.2 per cent to £296,285 in the twelve months to October.
The scale of that national decline marks the steepest annual fall recorded since October 2023, and represents a sharp acceleration from the 0.1 per cent dip logged in the twelve months to September.
The deterioration comes as the Bank of England pressed ahead with another interest rate increase this week, a move that property market experts warn will further erode confidence among both buyers and sellers.
Sellers have already been forced to cut asking prices to attract interest, while prospective buyers continue to hold back in the hope that conditions will improve before they commit.
Andrew Asaam, mortgages director at Lloyds, pointed to geopolitical factors compounding domestic pressures, saying: “Renewed inflationary pressures, driven in part by the conflict in the Middle East, are keeping borrowing costs high and adding to the squeeze on household finances, making some buyers understandably more cautious.”
Asaam struck a cautiously reassuring note on the longer-term trajectory, adding: “Looking ahead, conditions are likely to remain subdued in the near term, but we don’t expect this to lead to a sustained period of falling house prices.”
Jason Tebb, president of property portal On The Market, argued that lenders had already factored Thursday’s rate decision into their mortgage pricing, limiting the immediate shock to borrowing costs.
“But with further rate increases expected if inflation continues to rise, this will inevitably result in higher borrowing costs and challenge affordability going forward,” he said.
One potential source of relief on the horizon is the government’s revived Help to Buy scheme, set to launch in April next year and modelled on the original programme introduced by former chancellor George Osborne.
The initiative will offer equity loans designed to help first-time buyers bridge the gap on deposits, and has been broadly welcomed by housebuilders and property professionals eager for a demand stimulus.
Critics within the industry, however, have taken aim at the scheme’s delayed rollout and the £650,000 price cap applied to properties in inner London, where values remain far above the national average.
Nathan Emerson, chief executive of estate agency trade body Propertymark, acknowledged the scheme would “potentially make homeownership more accessible to people across England,” but cautioned that wider pressures remain a drag on sentiment.
Emerson warned that “renewed inflationary concerns and yesterday’s increase in the base rate will continue to weigh on consumer confidence, particularly as households remain mindful of the cost of living.”