UK house prices fell on an annual basis for the first time in almost three years in August, as rising borrowing costs and geopolitical uncertainty weighed on the housing market, according to lender Lloyds.
Lloyds reported this morning that house prices decreased by 0.4% in August compared with a year earlier, marking the first year-on-year decline since November 2023. On a monthly basis, prices dropped by 0.2% in August, following a 0.1% fall in July, bringing the average property price to £298,468.
The figures came in weaker than expected, as economists had forecast a 0.1% monthly rise and a 0.2% annual increase.
Market Conditions and Seller Behavior
Andrew Asaam, mortgages director at Lloyds, said the housing market has faced a more difficult backdrop in recent months, with global events affecting inflation and borrowing costs. He noted that sellers are not rushing to cut prices, but many are choosing to wait for better conditions.
“The housing market has faced a more difficult backdrop in recent months, with the impact of global events on inflation and borrowing costs creating greater economic uncertainty. What we’re not seeing is a rush of homeowners cutting prices. 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,” Asaam said.
This has led to fewer homes changing hands, with industry figures showing mortgage approvals at their lowest level since the start of 2024.
Impact of Bond Market Turmoil
The recent bond market turmoil has pushed up lenders’ borrowing costs, which could lead to more expensive mortgages. The increase in swap rates may reduce buyers’ purchasing power, potentially adding further pressure to the housing market.
UK mortgage borrowers are bracing for a rate jump amid the global bond sell-off, as higher costs could dampen demand and slow price growth further.
The Lloyds house price index was released at 7am BST, alongside German industrial output data for July. UK chancellor John Healey is also set to outline his economic agenda today.
