UK house prices fall 0.6% in October, steepest drop in over three years

Steepest monthly fall in more than three years

UK house prices fell 0.6% in October compared with September, according to the Lloyds index, leaving the average property at £296,285. It was the fourth consecutive monthly decline and the steepest since Lloyds recorded a 1.6% drop in August 2023. Analysts had expected a small rise of 0.1%, which would have been the first monthly increase since June. Compared with the same month a year earlier, prices were down 1.2%, the biggest annual fall since October 2023. The monthly fall equals £1,882 off the average value.

Monthly change vs September-0.6%

Annual change vs same month last year-1.2%

Analysts' expected monthly change0.1%

Monthly change vs September

-0.6 %

Annual change vs same month last year

-1.2 %

Analysts' expected monthly change

0.1 %

Data from the article text

Borrowing costs keep buyers cautious

The Bank of England raised its base rate by a quarter of a point to 4% on Thursday, 5 November, its first increase in three years, aiming to counter inflation pressure linked to the Iran war. Oil has traded above $100 a barrel in recent months, pushing fuel prices up and lifting inflation to 3.5% in September. According to Moneyfacts, the average two-year fixed mortgage stands at 5.97% and the average five-year fixed rate at 5.99%. Rightmove put the average five-year fixed rate at 5.5% at the end of October, up from 5% at the end of June. UK Finance estimates the rise would cost homeowners on tracker deals £30.72 on average, based on typical outstanding mortgage balances. Around 87% of outstanding homeowner mortgages are fixed-rate, and 2.3 million fixed-rate deals are due to expire in 2027.

2026-06

5 %

2026-10

5.5 %

Data from the article text

Estate agents and housebuilders pull back

Rightmove, the property portal, still expects revenue growth of 6% to 7% over 2026, a slight downgrade from its previous guidance of 6% to 8%. It also trimmed the top end of its guidance for average revenue per advertiser to £110 from £120, which it attributes entirely to housebuilders spending less on new homes. Buyer demand for resale properties fell 10% and sales agreed dropped 9% in the four months to the end of October. The number of new home developments was 6% lower at the end of October than at the end of last year. Rightmove said the government's First Homes scheme, announced in the autumn Budget, has improved housebuilder optimism, but any rise in new-home volumes is likely to come later in 2027. AJ Bell's head of markets, Dan Coatsworth, described Rightmove's update as relatively robust while noting that housebuilders, an increasing source of revenue for the portal, are spending less.

Lenders and agents on what comes next

Lloyds' mortgages director, Andrew Asaam, put the October fall in context, noting that prices have changed relatively little over the past couple of years as the market adjusted to higher interest rates. He also framed the current backdrop in direct terms:

“Housing demand is currently being tested by a challenging economic backdrop.”

Asaam expects conditions to stay subdued in the near term, but he does not anticipate a sustained period of falling house prices, and he expects wages to keep rising faster than property prices. Amy Reynolds, head of sales at the Richmond estate agency Antony Roberts, said buyers were still active but more careful, with remortgagers and second-steppers hit hardest.

“Another rise tells people that borrowing is getting more expensive, not cheaper, and that makes them hesitate.”

Savills expects the housing market to take until 2028 to recover, once a forecast improvement in the economy and in mortgage affordability gives it support.