UK house prices have recorded their first annual fall in almost three years. The market remained subdued during August.
The average property price fell by 0.2% during the month, according to the latest Lloyds House Price Index. That followed a 0.1% decline in July.
The average UK home now costs £298,468. That compares with £299,153 a month earlier.
On an annual basis, house prices fell by 0.4%. This marked the first year-on-year decline since November 2023.
Affordability pressures and borrowing costs continue to influence buyer activity. However, performance varies significantly across the UK.
Northern Ireland continued to record the strongest annual house price growth. Values increased by 6.9%.
Market remains subdued
Andrew Asaam, mortgages director at Lloyds, said: “UK house prices fell slightly in August, down 0.2% over the month following a similar decline in July. The average property now costs £298,468, marking the first annual fall in house prices since November 2023. Despite that, prices are still marginally up (+0.2%) since the start of the year.
“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 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 limited this will likely only have a 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.”
North-south divide
The regional picture remains mixed. Northern parts of the UK continue to outperform more expensive southern markets.
Northern Ireland recorded the strongest annual growth, with prices up 6.9%. The average property value reached a record £231,245.
Scotland also recorded strong growth. Prices increased by 3.5% over the past year to £223,437.
In Wales, prices increased by 0.6% annually. The average property value now stands at £230,282.
Northern regions also led growth within England.
Prices in the North East increased by 2.7% to £184,370. The North West recorded growth of 2%, taking its average to £248,675.
Prices fall across southern England
In contrast, prices remained under pressure across much of southern England. Higher property values continue to create greater affordability challenges.
The South East recorded the largest annual decline. Prices fell by 1.6% to an average of £381,729.
Greater London followed with a 1.5% annual fall. The average property price stood at £534,177.
The South West and Eastern England both recorded annual falls of 1.2%. Average prices stood at £298,807 and £331,410 respectively.
Industry reaction:
Jason Tebb, president of OnTheMarket: “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.”
Jeremy Leaf, north London estate agent: “We are seeing a bit of a stand-off between buyers who are nervous about making offers while worried about the effects of inflation on mortgage costs and sellers who believe they have reduced as much as they can.
“Therefore, prices overall in the fewer properties which are changing hands are not only softening but sales are taking longer.
“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. Thankfully, activity is picking up now that the main holiday season is over, which is helping to improve confidence a little.”
Nicky Stevenson, managing director of Fine & Country: “A 0.2% fall in UK house prices in August is a relatively modest move, but it masks a market that is becoming increasingly selective. Buyers are still active, yet higher mortgage costs and renewed inflation are making affordability much more important to the decision-making process.
“There are encouraging signs beneath the headline numbers. Zoopla’s 7% annual increase in people searching for homes suggests buyers are re-engaging, while the improvement in consumer confidence and the traditional seasonal uplift in autumn activity could give the market a welcome boost over the coming months.
“However, browsing is not the same as buying. Mortgage approvals are around 15% below last year’s level, and that gap shows that affordability is still holding some would-be movers back. The autumn market therefore needs to be viewed as a gradual recovery rather than a sudden surge.
“That makes pricing absolutely critical. In a market where buyers have more choice and are increasingly payment-conscious, an ambitious asking price can quickly become a barrier to securing a deal. Sellers who price realistically from the outset are much more likely to capture the attention of the buyers who are ready to act.
“The ingredients for a stronger autumn are certainly there, but the market will reward realism, not optimism alone.”
Anthony Codling, MD equity research, RBC Capital Markets: “In August, UK house prices posted their first annual fall since November 2023. The Lloyds House Price Index for August 2026 paints 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.
“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. Mortgage approvals at their lowest since January 2024 confirm that activity, not value, is bearing the brunt of the adjustment. The north-south divide in performance continues to sharpen, and with swap rates spiking to three-year highs in early September, the near-term backdrop is challenging.”
Nathan Emerson, CEO of Propertymark: “Across the year so far, many people have, in some way, felt the direct impacts of ongoing global unease on their monthly outgoings. We have witnessed many household costs continue to rise, while consumer affordability regarding housing has prompted a wave of caution, subsequently tapping the brakes on house price growth currently.
“As we head into the autumn months, the upcoming Autumn Budget may well help determine the plans of many aspiring buyers and sellers for their next house move, alongside the upcoming inflation figures and interest rate announcement in the middle of the month.
“Following what has, in part, been an uneven year, it is hoped that the housing market will regain a more stable footing as the year progresses.”
James Nightingall of HomeFinder AI: “Activity in the UK property market remained subdued last month as house hunters took a step back from their search. The slowdown in buyer motivation continues to impact on property values with some sellers seeing no other option but to reduce their asking price. As the summer holidays have come to an end, it remains to be seen if we will witness an autumn bounce.”
Iain McKenzie, CEO of The Guild of Property Professionals: “The latest Lloyds data underlines just how resilient the UK housing market is proving to be in an unusually challenging economic environment. A 0.2% monthly fall in prices is hardly a dramatic correction, particularly when households are contending with renewed inflationary pressure, higher energy costs and mortgage rates that remain elevated.
“The key question now is whether we are seeing a temporary summer pause or the start of a more sustained period of softer activity. Transaction volumes remain relatively healthy, while improving consumer confidence and the early signs of an autumn recovery in buyer searches suggest there is still underlying demand in the market.
“The next few months will be telling. If mortgage rates remain broadly stable and confidence continues to improve, the traditional autumn uplift in activity could provide some momentum. But affordability remains the defining constraint, so any recovery is likely to be measured rather than dramatic.
“For buyers, this could create an interesting window of opportunity. For sellers, the message is equally clear: demand is there, but it cannot be taken for granted. Homes that are sensibly priced from day one are far better positioned to convert that demand into viewings, offers and ultimately a sale.”
“We expect September to bring less new stock to market than usual, as we’re heading into a second year of ‘wait and see’ ahead of the Budget. Our hope is for a post-Budget bounce and a busy December, setting things up well for 2027.”
Ian Futcher, financial planner at Quilter: “Lloyds’ latest House Price Index shows UK house prices fell by 0.2% in August, leaving the average property worth £298,468. On an annual basis, prices were down 0.4%, marking the first year-on-year decline since November 2023.
“Clearly, stretched affordability and an uncertain economic background has had a negative impact on house prices and unfortunately recent volatility in bond markets has the potential to put further pressure on mortgage rates. Swap rates have risen sharply in recent days and some lenders have already begun adjusting pricing in response. For first-time buyers who have spent months building a deposit and carefully calculating what they can afford, sudden shifts in mortgage rates can pull the rug from under their feet just as they are preparing to make a move. This uncertainty is likely one factor behind the softer market conditions now emerging.
“Attention will now turn to the Bank of England’s next decision on 17 September. While few expect policymakers to make any dramatic moves, the accompanying commentary could prove just as important as the decision itself. Markets will be looking for clues on inflation and the future path of interest rates, with any shift in expectations likely to feed through to mortgage pricing.
“Demand for homeownership remains strong, but buyers and sellers alike benefit from stability. When mortgage costs move around quickly, buyers can become more hesitant and transactions can take longer as finances are reassessed. The latest figures already point to a cooling in activity, with mortgage approvals falling and transaction volumes remaining subdued. If markets settle, housing activity should remain supported. However, if volatility persists, affordability pressures are likely to keep a lid on both transactions and house price growth, particularly among those trying to get onto the property ladder for the first time.”
Mark Harris, chief executive of SPF Private Clients: “With tensions in the Middle East simmering once more and the price of oil moving higher, Swap rates – which underpin mortgage pricing – jumped up, before coming back down a little.
