UK house prices fell in November at their fastest pace since the financial crisis, excluding the lockdown period of spring 2020, as rising borrowing costs hit household finances, according to mortgage provider Nationwide.

House prices fell 1.4 per cent between October and November — the biggest fall since the country was in the depths of the coronavirus pandemic lockdown more than two years ago — following a 0.9 per cent drop the previous month. Excluding the pandemic, this was the largest monthly fall since the financial crisis in 2008.

The annual price growth slowed to 4.4 per cent in November, from 7.2 per cent in October. Both readings were below the 0.3 per cent monthly fall and 5.8 per cent annual increase forecast by economists polled by Reuters.

Robert Gardner, Nationwide’s chief economist, said the decline reflected the fallout from the government’s disastrous “mini” Budget, announced in September, on the housing market.

“While financial market conditions have stabilised, interest rates for new mortgages remain elevated and the market has lost a significant degree of momentum,” he added.

The UK average house price dropped to £263,788, down from £273,751 at its peak in August, according to Nationwide.

Mortgage rates reflect medium-term policy interest rate expectations that jumped after former chancellor Kwasi Kwarteng’s fiscal statement, which contained £45bn of unfunded tax cuts.

Markets’ expectations of Bank of England interest rates by the summer 2023 year spiked to 6 per cent after the chancellor’s announcement on September 23, from 4.6 per cent in mid-September.

These expectations have now returned to pre-mini Budget levels, but are still much higher than the 2.7 per cent priced in July, reflecting the more aggressive stance by the BoE as it reacts to the fastest inflation rate in 40 years.

The rise in mortgage rates comes at a time when household finances are hit by the rising cost of goods and services, making it harder for households to afford to buy a property.

On Tuesday, separate data from the BoE showed that mortgage approvals fell to their lowest level since June 2020. At the same time, the average rate for new mortgages rose to 3.09 per cent, the highest since 2014.

Gardner said that the housing market looks set to remain “subdued” in the coming months on the back of high inflation and the economy slipping into recession.

Gabriella Dickens, senior UK economist at the consultancy Pantheon Macroeconomics, said she expected a peak-to-trough fall in house prices of about 8 per cent, reversing about one-third of the increase since the start of the pandemic.

This is because, in addition to rising rates, the disposable income of households looks set to fall by about 2 per cent next year, as government support towards energy bills is watered down and unemployment starts to rise.

Andrew Wishart, senior property economist at Capital Economics, said that with the cost of buying a home “exceptionally high”, a significant fall in mortgage rates and a 12 per cent drop in house prices “will be necessary for the housing market downturn to bottom out”.

This was unlikely to happen before 2024, he added.