U.K. house prices fell at its fastest rate in October in 21 months, after mortgage rates soared in reaction to the ill-fated mini budget.
According to the latest data from one of the U.K.’s biggest mortgage lenders, Halifax, house prices in the U.K. declined by 0.4%, the third consecutive fall in four months and faster than the 0.1% recorded in September.
Halifax Mortgages director Kim Kinnaird said “there’s no doubt the housing market received a significant shock as a result of the mini-budget which saw a sudden acceleration in mortgage rate increases.”
Fixed rates on mortgages hit their highest since 2008 in the wake of the mini-budget, that ultimately led to the resignations of both Chancellor Kwasi Kwarteng and then Prime Minister Liz Truss.
According to the Bank of England, average two-year fixed rates (with a 75% LTV) hit 6.01% at the end of October, shooting up from 4.17% at the end of September. This time last year, the rate was 1.29%.
Average five-year fixed rates (with a 75% LTV) increased from 3.96% in September to 5.61% in October 2022. Last October, the rate stood at 1.3%.
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“While it is likely that those rates have peaked for now – following the reversal of previously announced fiscal measures – it appears that recent events have encouraged those with existing mortgages to look at their options, and some would-be homebuyers to take a pause,” Kinnaird added.
The latest Bank of England figures show the number of mortgages approved fell by 10.3% in September to 66,789. Year-on-year, that figure is 7.3% below the same period last year.
The market is continuing to cool as annual price growth has been pulled down from 9.8% to 8.3%. This means the average U.K. property now costs £292,598 ($335,072), down from £293,664 last month.