The mortgage lender’s latest house price index revealed a 0.6% fall in prices in October, compared to a 0.1% fall in September.
This means the average UK property price is now £296,285, down from £298,167 in September.
Andrew Assam, director of mortgages at Lloyds, said: “Housing demand is currently being tested against a difficult economic backdrop.
“Renewed inflationary pressures, driven in part by conflict in the Middle East, are keeping borrowing costs high and increasing pressure on household finances, understandably making some buyers more cautious.”
However, Assam said it was also “important” to put this price decline in context and noted that house prices, over the past two years, have changed relatively little as the market adjusts to higher mortgage rates.
He added: “The recent rise in energy and other household costs has increased pressure on buyers, so some adjustment in prices is not surprising.”
“Looking ahead, conditions are likely to remain weak in the near term, but we do not expect this to lead to a prolonged period of lower house prices. As wages continue to rise faster than property prices, the gap between earnings and house prices should gradually narrow, helping to improve affordability over time.”
The data comes just one day after the Bank of England raised interest rates by 0.25% to 4% – its first rate hike in more than three years.
Although lenders have already priced this hike into their fixed-rate mortgages, it means homeowners will have to pay more toward repayments if they remortgaged in the last few months.
While falling home prices represent an opportunity for buyers — especially those taking their first step toward homeownership — these high mortgage rates also create a barrier.
Andrew Montlake, CEO and Corico is based in London“Buyers are still there, but they are more cautious, more price sensitive and less willing to expand beyond what feels comfortable,” he told Newspage.
“For buyers, this is not necessarily bad news. A calmer market can create more room for negotiation, but the real issue remains the cost of borrowing and not whether the property is 1% cheaper than it was last year.
“For sellers, realism is crucial. Homes that are reasonably priced can still sell, but maintaining aspirational prices is becoming more difficult. This market is still taking its foot off the accelerator, not sliding into the abyss.”
