House prices dropped by 1.2% year-on-year in October, the largest fall since October 2023, Lloyds has revealed.

The bank’s latest house price index found that the average property price stood at £296,285 last month.

Month-on-month, house prices fell by 0.6%, following a 0.1% decrease in September.

Mortgages director at Lloyds, Andrew Asaam, said that many factors are at play in this decline in house prices.

He stated: “Housing demand is currently being tested by a challenging economic backdrop. Renewed inflationary pressures, driven in part by the conflict in the Middle East, are keeping borrowing costs high and adding to the squeeze on household finances, making some buyers understandably more cautious.

“However, it’s important to put October’s fall in context. House prices have changed relatively little over the past couple of years, as the market has gradually adjusted to higher interest rates. The recent rise in energy and other household costs have added to the pressure on buyers, so some adjustment in prices is not surprising.

“Looking ahead, conditions are likely to remain subdued in the near term, but we don’t expect this to lead to a sustained period of falling house prices .”

Northern Ireland continued to lead the UK, with annual house prices rising by 4.4%. The average property value now stands at £228,708, and follows an increase of 6.9% in September.

Scotland (£222,667) and Wales (£233,116) also saw increases of 2.8% and 1.6% respectively, while in England, the North West (2.2%), the North East (2%) and the West Midlands (0.3%) were the only regions to see positive annual growth.

House prices remained under pressure across much of the South, with Greater London recording the largest annual decline in house prices, falling by 3.1% to an average of £524,892.

Head of personal finance at AJ Bell, Sarah Coles, stated: “The market has succumbed to gravity. Higher mortgage rates, a glut of homes on the market and a dearth of buyers have taken their toll, pushing house prices down more significantly. They dropped 1.2% in the year to October.

"Things are unlikely to pick up anytime soon either. Variable rates rose again after yesterday’s Bank of England rate hike, and are vulnerable to more rises as we head into 2027. Fixed rates, meanwhile, have taken a small step back in recent days, as the market is pricing fewer hikes in over the coming months. However, average rates are still painfully close to 6% over two and five years, and every time we get more bad news about the international picture, it threatens to push these rates even higher.

We’re not seeing really significant price drops, so we will have to wait to see whether sales can hold up, or whether buyers put off their purchases in the hope that falling prices can net them a better deal a few months down the line. If too many buyers are put off, it could mean prices fall further."

---