Can you guess how much house prices have changed?

Average house prices in the UK fell at their fastest rate in 14 years in July, latest figures reveal, following repeated rises in borrowing costs.

Property values fell by 3.8% on average annually in July, marking the weakest reading since July 2009, according to the Nationwide Building Society.

The lender said house prices dropped by 0.2% month-on-month in July, reaching an average of £260,828, leaving the typical home 4.5% cheaper than the peak of August 2022.

It comes after the Bank of England raised the base interest rate for the 13th consecutive time in June in a bid to control inflation - with the potential for it to rise even further on Thursday from its current 5%.

But just how significant is the drop of house prices in June? And how have house prices risen over the past 14 years?

Use the tool below to see if you can guess it right.

How much have house prices changed since January 2009?

While house prices may have fallen in July at their fastest rate since the aftermath of the 2008 financial crisis, data shows they've still risen significantly over that whole period.

The average price of a house in January 2009 was £150,501, compared to £260,828, according to figures from Nationwide.

While a rise would be expected due to healthy levels of inflation and wage growth, data from the Office for National Statistics (ONS) suggests it has become increasingly harder for people to get onto the housing ladder.

ONS data shows a significant jump in "Consumer prices index including owner occupiers' housing costs" (CPIH) - a measure of inflation - compared to comparative real earnings, which have fallen significantly over the past few years.

How have house prices changed over the past 50 years?

Taking a look back at longer-term data gives us an even better perspective on how house prices have changed over the decades.

Using the tool below, have a guess of how much the average price of a house was in May 1973.

According to the Land Registry's UK House Price Index, the average price of a house in May 1973 was £8,144 - which of course could buy you a lot more back then due to inflation.

However, £8,000 should actually equate to about £82,790 in today's money (according to the Bank of England's inflation calculator),

With the average house price now standing at £285,000, its little wonder it is so much harder for younger people in particular to get their foot on the housing ladder.

A record-breaking economic boom of the late 80s could help explain a significant uptick in prices towards the end of the decade, and as expected, the Land Registry's chart shows a sharp dip after the 2008 housing crash.

Why are house prices falling?

The Bank of England has deliberately set interest rates higher compared to recent years in an overt attempt to make mortgages more unaffordable, thereby squeezing homeowners' disposable income - a key lever used by the bank to bring down inflation which was the highest its been for 40 years until recently.

As prospective buyers find it harder to afford a mortgage on a new home, the property market has subsequently cooled down as market confidence takes hit.

This is compounded by a drop in real earnings, with estate agent Savills revealing an increase in people looking to downsize to smaller properties since September - when the cost of living crisis really started to bite.

What is the impact?

Many first-time buyers may welcome a drop in house prices, which - as we've shown - have been rising pretty consistently over the decades.

But Nationwide’s chief economist Robert Gardner says that as longer-term interest rates remain high, housing affordability will remain "stretched for those looking to buy a home with a mortgage".

He adds: "A prospective buyer, earning the average wage and looking to buy the typical first-time buyer property with a 20% deposit, would see monthly mortgage payments account for 43% of their take-home pay (assuming a 6% mortgage rate).

“This is up from 32% a year ago and well above the long-run average of 29%. Moreover, deposit requirements continue to present a high hurdle – with a 10% deposit equivalent to 55% of gross annual average income.”

Mortgage costs could rise even further still if the Bank of England goes ahead with another interest rate hike as expected on Thursday.

However, some lenders, including HSBC, Barclays and Nationwide have reduced their fixed-rate mortgage pricing after inflation eased more than expected to a 15-month low in June.

"This has led to a calming of swap rates, which underpin the pricing of fixed-rate mortgages, after weeks of considerable volatility," which Mark Harris, chief executive of mortgage broker SPF Private Clients, says has led to a "calming of swap rates".

Nicola Schutrups, managing director at Southampton-based mortgage broker The Mortgage Hut, said: “Further falls in house prices are likely for the rest of 2023 but if inflation continues to come down and the jobs market remains strong, there’s still a chance for a soft landing.”

Iain McKenzie, CEO of the Guild of Property Professionals, added: “The latest inflation figures show some light at the end of the tunnel, and there is still a good chance that the year will be softer on the industry than was previously forecast.”