The UK’s housing market is showing signs of slowing and rising interest rates are set to exert “significant downward pressure” on prices in the months ahead, Halifax has said.

The mortgage provider claimed that since June, home prices have been “essentially stagnant.”

According to Halifax, prices increased at their slowest rate since January in September, rising by 9.9% annually. This week, interest rates on common two- and five-year fixed-rate mortgages reached their highest level in ten years.

They continued to rise on Friday. According to Moneyfacts, the rate on an average two-year fixed-rate mortgage reached 6.16%, which is the highest level in 14 years.

The usual five-year fixed rate mortgage rate, which is currently at 6.07%, also surpassed 6% this week for the first time in 12 years. After the mini-budget last month, mortgage rates spiked sharply after months of gradual growth.

Halifax said that the average UK home now costs £293,835, a tiny decrease in house prices in September of 0.1% from the previous month.

The home market “may have already started a more persistent period of slower growth,” according to Halifax Mortgages director Kim Kinnaird, even before the consequences of the mini-budget.

Predicting what will happen ahead requires understanding the numerous factors currently in play, and the housing market has recently frequently defied predictions, she continued.

The prospect of interest rates continuing to rise sharply amid the cost of living squeeze, as well as the impact of higher mortgage borrowing costs in recent weeks on affordability, are likely to exert more significant downward pressure on house prices in the months to come. This is true even though stamp duty reductions, a shortage of available homes for sale, and a strong labor market all support house prices.

Halifax, the largest mortgage lender in the UK, increased its rates on a number of agreements for new borrowers earlier this week to well over 5%.

The Chancellor, Kwasi Kwarteng, met with the heads of the main UK banks on Thursday, and they addressed the most recent changes to the mortgage market.The scheme – which was launched in April 2021 during Covid – is designed to help people get on the property ladder, as it allows homebuyers to buy a property with only a 5% deposit.

It is available to anyone buying a home costing up to £600,000, unless they are buy-to-let or second homes.

Under the scheme, the government offers a partial guarantee, generally of 15%, to compensate lenders if the borrower defaults on repayments.

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