Average house prices fell on both a monthly and yearly basis in August, the first year-on-year decrease since November 2023, according to Lloyds’ House Price Index.
In August, UK house prices dropped by 0.2% month-on-month, following a 0.1% decrease in July. According to Lloyds, the average house price now stands at £298,468, compared with £299,153 in July. Year-on-year, prices fell by 0.4%. Despite the decline, house prices are still 0.2% up since the start of the year.
Andrew Asaam, Mortgages Director at Lloyds, said: “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.”
“As a result, fewer homes are changing hands, with latest industry figures showing mortgage approvals now at their lowest level since the start of 2024.”
“It’s also important to keep recent price movements in perspective. Average house prices remain around 25% higher than they were at the end of 2019, despite the substantial increase to interest rates seen over recent years. The market’s adjustment to higher borrowing costs has been gradual, with wage growth helping to offset some of the pressure on affordability. The recent modest declines in prices are best viewed in that wider context.”
“We expect the market to remain fairly subdued in the months ahead, but this will likely only have a limited impact on house prices. While affordability remains a challenge, wages continue to grow, and employment has held up better than many anticipated. This will help to support demand from those who need or want to move.”
The Lloyds House Price Index highlights a clear divide in house price performance across the UK. Northern Ireland continues to record the strongest annual growth, with prices up 6.9% year-on-year. While the rate of growth has slowed recently, the region is still recording an all-time high average property value of £231,245.
Scotland also continues to see solid growth, with prices rising 3.5% over the past year to an average of £223,437. In Wales, annual growth stands at +0.6%, taking the typical property value to £230,282.
Within England, growth remains strongest in northern regions. The North East recorded annual growth of 2.7%, taking the average property price to £184,370, while the North West saw prices rise 2.0% to £248,675.
By contrast, price growth remains under pressure across much of southern England, reflecting the greater affordability challenge caused by higher average prices.
The South East saw the largest decline, with prices down 1.6% year-on-year to £381,729, followed by Greater London, where prices fell 1.5% to £534,177. The South West and Eastern England both recorded annual declines of 1.2%, with average prices of £298,807 and £ 331,410 respectively.
Charlotte Harrison, CEO of Homes at Skipton Building Society, commented: “The resilience we’re seeing in the housing market is encouraging, particularly given ongoing economic uncertainty. While average UK house prices have fallen annually for the first time since 2023, this masks very different realities depending on where people live and their stage of life.”
“While there are signs that affordability is improving slightly, the latest Skipton Group Home Affordability Index shows that many first‑time buyers remain under significant pressure. Housing costs continue to account for more than 45% of household income for many, leaving little capacity to save for a deposit. Rising rental costs are compounding this challenge, making it harder for would‑be buyers to get ahead. Regional differences are also increasingly stark, with average first‑time buyer deposits equivalent to 140% of household income in London, double the level seen in the North.”
“This is where lenders and the wider industry have an important role to play. Continued innovation, improved flexibility and practical support will be key to helping people navigate affordability pressures and keep homeownership within reach at different life stages.”
Jason Tebb, president of OnTheMarket, said: “Buyers and sellers are taking a pragmatic approach and adjusting expectations. The resilience of the market, and determination of needs-based buyers and sellers who are proceeding with their transactions, remains evident.”
“Ongoing Middle East tensions have created further volatility among Swap rates in the past week, but so far this year, the Bank of England has held interest rates steady, creating a calming effect. Affordability concerns remain however, particularly if lenders increase their mortgage pricing in the short term and the Bank raises interest rates at next week’s meeting, but borrowers seem to be adapting to shifting market conditions remarkably well.”
“As we head into autumn, and another Budget beckons, political uncertainty and challenging economic conditions continue to form a backdrop to activity.”
