House prices fell at the fastest rate in 14 years last month, according to the latest figures from Nationwide.

There was a 3.1% drop in March, which is the largest annual reduction since July 2009.

Statistics for March show a 0.8% fall from the previous month, which is the seventh monthly drop in a month, and prices are now 4.6% lower than the peak last August.

Regional figures show the West Midlands was the strongest performing region in the first quarter, up 1.4%, while Scotland remained the weakest with a 3.1% fall, the Nationwide House Price Index shows. Nine out of 13 regions recorded annual house price declines in Q1.

Robert Gardner, Nationwide’s chief economist, says: “The housing market reached a turning point last year as a result of the financial market turbulence which followed the Mini-Budget.

“Since then, activity has remained subdued – the number of mortgages approved for house purchase remained weak at 43,500 cases in February, almost 40% below the level prevailing a year ago.

“It will be hard for the market to regain much momentum in the near term since consumer confidence remains weak and household budgets remain under pressure from high inflation.

“Housing affordability also remains stretched, where mortgage rates remain well above the lows prevailing at this point last year.”

Industry reaction

Jason Tebb, CEO at OnTheMarket, says: “With March seeing a further decline in annual house price growth, the adjusting and rebalancing of the market continues.

“Rising interest rates, combined with a higher cost of living have contributed to a slowdown in activity, inevitably impacting the confidence of the average property-seeking consumer in the short term.

“Pressure on household budgets has been considerable and is not yet easing, although many believe inflation and interest rates are close to their peak.”

Nathan Emerson, CEO of Propertymark, says: “Our member agents are reporting transaction levels year on year to be stable and listings of new properties coming to the market also being steady.

“With a stream of serious buyers still keen to move, and prices still higher compared to this time last year, sellers are still in a strong position to sell, however they can no longer test the market at higher prices and align with those achieved last year. Instead, they will need to reduce or be open to offers in order to get a more realistic and efficient sale.”

Mark Harris, CEO at SPF Private Clients, says: “Average property prices fell again in March as higher mortgage costs, along with the rising cost of living, have an inevitable impact on affordability and how much buyers are able to spend.

“Swap rates, which underpin the pricing of fixed-rate mortgages, remain incredibly volatile, but the good news is that the general direction of fixed-rate mortgages continues to be downwards, with some of the bigger lenders back in the sub-4 per cent five-year fixed-rate space.”

Tomer Aboody, director of property lender MT Finance, says: “With the Kwarteng Budget and macro-economic climate affecting interest rates and inflation, low confidence in the housing market was inevitable.

“Buyers and sellers paused or withdrew from purchases as rates soared. With a combination of the higher cost of living and in some cases rates at four or five times what they had been, it wasn’t surprising that there was out-and-out panic.

“As we are now seeing more stability in swap rates, which is leading to more confidence, the market is hopeful of a better second quarter.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “Although these figures show house price growth is still slowing, we have seen signs of improvement over the last few months at the sharp end.

“Clearly the rise in mortgage rates and cost of living continues to weigh heavily. However, buyers have been tempted back by more choice and less competition compared with much of 2021 and 2022 as the balance between supply and demand improves.

“If anything, the passage of time has made the reasons for moving more compelling, but buyers and sellers want to ensure they are not caught out financially so are trying to negotiate best possible terms, which has led to some price softening.”

Tom Bill, head of UK residential research at Knight Frank, says: “The reverberations from the Mini-Budget that shook the UK housing market won’t disappear overnight.

“After effectively shutting down for Christmas in September, the property market turned back on in January as stability returned to Westminster and the mortgage market.

“Activity has been solid this year as buyers accept the new normal for mortgage rates.

“For anyone with memories that stretch further back than 2008, it looks very much like the old normal. That said, more financial pain will enter the system as owners move onto higher fixed-rate deals and combined with an increase in supply from the lows of the pandemic, we expect UK prices to fall by a few percent this year.”