UK house prices remained broadly flat in July, according to Lloyds Banking Group, as potential buyers faced higher mortgage rates, geopolitical uncertainty, and stretched affordability. The average property cost £299,253 in July, a decrease of £143 compared with June, based on the lender's monthly index.
Prices showed only a 0.1% increase compared with the same month last year, marking the weakest rate of annual growth since November 2023. This stagnation reflects a market where activity is highly sensitive to changes in borrowing costs, as noted by Amanda Bryden, head of mortgages at Lloyds.
Affordability challenges persist
“While housing demand remains broadly steady, activity continues to respond quickly to changes in mortgage rates,” Bryden said. “Looking ahead, we expect market activity and house prices to remain relatively stable over the remainder of the year. Developments will be shaped by both how mortgage rates respond to the outlook for inflation and wider household confidence.”
The recent rise in tensions in the Middle East has fueled concerns about inflation, leading to expectations of potential interest rate increases later this year. As of Friday, the average rate for a two-year fixed residential mortgage stood at 5.63%, while the average five-year deal was 5.67%, according to Moneyfacts. Both rates were below 5% at the start of the year.
Market in 'suspended animation'
Anthony Codling, an analyst at RBC Capital Markets, described the current market as being in a state of “suspended animation.” He explained, “Prices are neither falling sharply nor rising with any conviction, trapped in a narrow two-year range by the twin vices of stretched affordability and mortgage rates that refuse to fall far enough for long enough. The market is not in crisis, but the green shoots that flickered briefly in early 2026 have wilted.”
This sentiment is echoed in the regional variations across the UK. Northern Ireland remained the strongest performer, with house prices growing by 7.4% year on year to an average of £231,131. In Scotland, prices rose by 3.6% to £223,246, while Wales saw a 1.6% increase, bringing the average to £231,458.
North-south divide widens
In England, the north outperformed the south. The north-east reported annual growth of 2.8%, with an average price of £182,488, and the north-west saw a 2.1% rise to £247,836. Conversely, the south-east experienced a 2% decline to £381,146, and Greater London recorded a 1.3% drop, bringing the average to £533,930.
Nicholas Finn, managing director at Garrington Property Finders, noted that the north-south property divide is “becoming more entrenched.” He added, “In southern areas, a glut of supply is attracting too few serious buyers, and this is steadily dragging down prices. In northern England, the forces of supply and demand are more balanced. The buzz surrounding No 10 North, and the prospect of job creation and government investment in northern areas, are boosting sentiment and supporting the upward trajectory in prices.”
The overall picture suggests a market that is neither crashing nor booming, with affordability and mortgage rates continuing to be the primary drivers of activity.
