UK house prices unexpectedly fell last month as concerns over the sluggish economy outweighed an anticipated rush of people trying to complete purchases before stamp duty increases in April.
The average property price dipped by 0.1% in February to £298,602, having hit a record high in January, according to Halifax.
Analysts had forecast a 0.3% increase in month-on-month growth, and a 3.1% annual rise; however, Britain’s biggest mortgage lender said that also fell short of expectations, at 2.9%.
Economists and industry analysts had expected house prices to continue to rise, fuelled by falling mortgage rates and a buyer rush to complete purchases before stamp duty changes next month.
Markets are pricing in at least two more 0.25 percentage point cuts in interest rates this year after the Bank of England cut rates to 4.5% last month, which is expected to flow through to more competitive mortgage deals.
On Friday, HSBC reduced its standard variable rate, meaning lower monthly payments for homeowners who were on a fixed deal that has expired and they have not taken another product.
The rate has been reduced by 0.25 percentage points to 6.74%, the lowest HSBC has offered in two years.
There has also been a flurry of increased buyer activity after the chancellor, Rachel Reeves, announced in her October budget the end of temporary stamp duty cuts in England and Northern Ireland from April. Scotland and Wales set different taxes on house purchases.
From 1 April, first-time buyers in England and Northern Ireland will have to pay tax on homes worth more than £300,000, down from £425,000, and the threshold for a reduced rate for first-time buyers will drop from £625,000 to £500,000.
The zero-tax stamp duty threshold that applies to all housing in England and Northern Ireland will drop to £125,000 from £250,000.
“February’s figures highlight the delicate balance within the UK housing market,” said Amanda Bryden, the head of mortgages at Halifax, which is part of Lloyds Banking Group. “While there’s been talk of a last-minute rush on new mortgages ahead of the changes to stamp duty, inevitably we’ve seen some of the demand that was brought forward start to fade as the April deadline ticks closer, given the time needed to complete a purchase.”
Halifax has reported two monthly dips in house prices over the last six months – there was also a 0.2% fall in December.
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“A -0.1% monthly dip recorded by Halifax in itself shouldn’t cause too much concern for housebuilders and mortgage lenders,” said Derren Nathan, a senior equity analyst at Hargreaves Lansdown. “But digging deeper into the data reveals a more mixed picture. First-time buying activity eased and, looking a little further ahead, changes to the stamp duty regime in April could cause some indigestion.”
Halifax said Northern Ireland continues to show the strongest growth in the UK, at 5.9%. Scotland recorded the fastest rate of annual house price growth in 13 months at 3.8%.
House prices in Wales grew at 2.8% on an annual basis. In England, Yorkshire and Humberside recorded the strongest growth of any region, the first time since July 2021, up 4.1% on an annual basis.
“While house price growth has slowed overall, market activity remains strong and comparable to pre-pandemic levels, demonstrating a resilience among buyers that’s been evident in the face of higher borrowing costs,” Bryden said.
“While those affordability challenges persist, the ongoing shortage of housing supply coupled with sustained demand suggests property prices will continue to rise this year, albeit at a more measured pace compared to last year.”
