Key facts
- UK house prices fell 0.4% year-on-year in August, the first annual decrease since November 2023.
- The average property price in August was £298,468, a 0.2% decrease from July.
- Lloyds attributed the subdued market to higher inflation, borrowing costs, and geopolitical tensions.
- Average mortgage rates for two-year fixed deals were 5.6%, up from below 5% at the start of the year.
- Northern Ireland recorded the strongest annual house price growth at 6.9%, while the South East and London saw the largest declines.
UK house prices experienced their first annual decline in nearly three years in August, with a 0.4% drop according to figures from Lloyds Banking Group. This marks a significant shift from previous months and contrasts with data from rival lender Nationwide Building Society, which reported 1.6% annual growth for the same period.
The decline, the first since November 2023, saw prices fall 0.2% month-on-month, contrary to economists' expectations of a slight rise. July's initial reading of 0.1% growth was also revised down to a 0.1% fall.
Andrew Asaam, mortgages director at Lloyds, attributed the challenging market backdrop to global events impacting inflation and borrowing costs, leading to greater economic uncertainty. He noted that while homeowners are not rushing to cut prices, many are hesitant to accept lower offers, and some buyers are waiting for conditions to improve.
Analysts anticipate further weakness in the housing market. Ruth Gregory, deputy chief economist at Capital Economics, expects house prices to largely flatline for the remainder of the year, with typical two-year fixed-rate mortgages potentially rising to nearly 5% this month. The most recent official data from the Office for National Statistics showed a 2.0% annual price increase in the 12 months to June.
Northern Ireland remained the strongest performing region with 6.9% annual growth, while the South East and London saw the largest price drops.