House prices fell by -0.9% in October, according to Nationwide. This was the biggest fall since June 2020, taking average house prices back to their level in April 2022. With demand easing and higher mortgage rates, we expect prices to fall further during 2023.

Transaction levels remained high in September, suggesting that buyers brought forward completions to lock into lower mortgage rates agreed before the mini-budget. Buyers with mortgage offers at lower rates may prop up transaction numbers in October too, but to a lesser extent.

Market activity is now reducing and that will limit transaction numbers over coming months. Mortgage approvals fell back to pre-pandemic levels in September, according to the Bank of England. Surveyors continued to see fewer buyer enquiries and new instructions, according to the September RICS survey. And the most recent portal data shows demand falling through October and fewer sales agreed.

Mortgage rates may be close to peak, as swap rates have been declining since mid-October. Certainly, although the Bank of England raised the base rate on the 3rd November by 75bps, it is likely that lenders had already priced this in.

The number of mortgage products available is beginning to recover, after the widespread withdrawal that followed the mini budget. But those at higher loan to value ratios remain in short supply. Products at 75 to 85% LTV are at around 66% of previous levels, but products at LTVs of 90% and above are at only 47% of pre-mini budget levels.

We expect house prices to fall by an average of 10% in 2023 and that transaction volumes will also be substantially lower. Both house price growth and transaction numbers are expected to improve from 2024. For more detail, see our forecasts webpages, here.

The other significant change in the market this month is the end of Help to Buy. The last day for registrations under the scheme was 31st October. This coincided with a renewed lack of high LTV mortgage products, making new homes buyers with small deposits particularly reliant on schemes such as Deposit Unlock. You can read more about support for new homes sales after Help to Buy here.

Annual house price growth to July was strongest in south Wales, up 22.5% in Newport and 19.7% in Merthyr Tydfill. Aberdeen City was the only local authority to experience house price falls at -2.4%.