UK house prices record first annual fall since 2023

UK house prices fell by 0.4% year-on-year in August, marking the first annual decline since November 2023. Lloyds’ latest monthly index showed that this outcome was weaker than economists’ median expectation of a 0.2% annual rise, signalling softer market conditions than anticipated.

On a monthly basis, the average UK property price slipped by 0.2% compared with July, a decrease of £685. This left the average property costing £298,468 in August, underscoring a modest but broad-based easing in values at the national level.

While prices are edging lower, Lloyds said there is no widespread rush by homeowners to cut asking prices. Instead, more sellers are choosing to sit tight rather than accept offers they consider too low, contributing to a relatively constrained level of supply coming onto the market.

The latest data highlights notable regional differences across the UK housing market. The South East recorded the largest regional fall, with prices down 1.6% year-on-year to an average of £381,729, while Greater London saw a 1.5% decline to £534,177.

In contrast, Northern Ireland continued to see the strongest annual house price growth, with prices rising 6.9% and the average property value reaching a record £231,245. Scotland also posted solid annual growth of 3.5%, indicating that not all parts of the UK are experiencing price weakness.

These regional patterns point to a split between parts of the south of England, where prices are under more pressure, and areas such as Northern Ireland and Scotland, where values are still climbing. The divergence suggests local economic and demand conditions are playing a significant role in price trends.

Lloyds reported that mortgage approvals have fallen to their lowest level since the start of 2024. This decline in approvals indicates subdued transaction activity and a more cautious stance from both lenders and borrowers in the current environment.

Market tracker Moneyfacts showed that the average two-year fixed residential mortgage rate is about 5.6%, while the average five-year fixed rate stands around 5.66%. These elevated borrowing costs continue to weigh on affordability and are likely contributing to reduced demand and lower approval volumes.

Lloyds’ mortgages director noted that some buyers are waiting to see how conditions develop before committing to a purchase. Combined with sellers’ reluctance to accept lower offers, this has created a stand-off in parts of the market, leading to fewer completed transactions even as prices edge down.