The average UK house price fell to £298,468 in August, a 0.4% decrease compared with the same month last year, marking the first annual decline since November 2023, according to lender Lloyds. The drop came in below economists' expectations of a 0.2% annual rise, as polled by Reuters.
Monthly decline and market conditions
On a monthly basis, prices fell by 0.2% or £685 compared with July, according to Lloyds' monthly index. The lender attributed the decline to higher mortgage rates, geopolitical uncertainty, and stretched affordability.
Andrew Asaam, a director at Lloyds, described the UK housing market as "subdued" in the face of higher inflation and borrowing costs. "What we're not seeing is a rush of homeowners cutting prices," he said. "But more are choosing to sit tight, with sellers reluctant to accept offers they feel are too low, while some buyers are waiting to see how conditions develop."
Mortgage rates and buyer sentiment
The average rate for a two-year fixed residential mortgage stood at 5.6% on Friday, while the average five-year deal was 5.66%, according to market tracker Moneyfacts. Both rates were below 5% at the start of the year, reflecting heightened volatility for property buyers.
Mortgage approvals reached their lowest level since the start of 2024, Lloyds reported. Tensions in the Middle East have stoked inflation fears this year, feeding expectations of further interest rate rises.
Regional variations across the UK
Northern Ireland remained the strongest performer, with average prices rising 6.9% year-on-year to £231,245. Scotland saw a 3.5% increase to an average of £223,437, while Wales recorded a 0.6% rise to £230,282.
In England, a north-south divide was evident. The north-east and north-west saw growth of 2.7% and 2% respectively, with average prices of £184,370 and £248,675. Meanwhile, the south-east reported the biggest drop across the UK, falling 1.6% to £381,729, while greater London prices declined 1.5% to £534,177.
Market outlook and expert views
Jeremy Leaf, a north London estate agent, described the slowdown as a "standoff" between nervous buyers and sellers who believe they have already reduced prices as much as they can. "There is more movement when sellers set realistic asking prices from the outset and appreciate after a period of marketing that even a cheeky offer is worth considering," he said. "Activity is picking up now that the main holiday season is over, which is helping to improve confidence a little."
Anthony Codling, an analyst at RBC Capital Markets, said the figures paint "a picture of a market under meaningful pressure from multiple directions: elevated mortgage rates, geopolitical uncertainty pushing up energy prices, and a consumer that is both cautious and increasingly stretched." He added: "Sellers are not panicking and cutting prices aggressively; they are simply sitting tight. Buyers, meanwhile, are waiting for clarity on the path of interest rates."
Asaam noted that the market is forecast to "remain fairly subdued in the months ahead, but this will likely only have a limited impact on house prices."
