More than £16,000 slashed from the value of the average London home says Land Registry

London house prices fell sharply in October but remain close to all-time highs, latest official figures reveal today.

The average cost of a home in the capital dropped by 3.6%, an unusually large monthly fall, according to the Land Registry, slashing more than £16,000 from the value of a typical London home.

That left it standing at £515,504, down 3.1% year on year. However, even after the big fall the average price is still only 5% below the high of £543,572 reached in August 2022.

Land Registry figures tend to lag the market as they are based on completion prices agreed several months earlier. So today's Land Registry numbers could reflect the impact of the half point rise in rates ordered by the Bank of England in June.

The market has been suppressed by the steep rise in borrowing costs since December 2021 which has pushed up the cost of fixed rate mortgages and hit the confidence of buyers.

However, today’s better than expected inflation figure - the Consumer Prices Index fell to 3.9% - makes it more likely that interest rates will start to fall within the next six months, giving a boost to the market.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Swap rates, which underpin the pricing of fixed-rate mortgages, have dropped significantly over the past month.

“Better-than-expected inflation news this morning has pegged them back further, with five-year Swaps falling to 3.45 per cent, while two-year Swaps are slightly higher at 4.11 per cent.

“The next move in base rate is almost certainly downwards; the question is how soon? Increasingly, speculation suggests May or June, which will come as welcome news for hard-pressed borrowers.

“In the meantime, lenders continue to reduce their mortgage rates, and will be keen to get 2024 off to a good start after a disappointing 2023. If mortgage rates continue to fall and borrower affordability continues to improve, we would expect transaction numbers to improve.”