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5m agoUK house prices fall: What the experts say
14m agoNorth-South house price divide continues
22m agoBut prices still up in the long term, Lloyds says
24m agoIntroduction: UK house prices fall in August
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UK house prices have fallen on an annual basis for the first time in almost three years, as the housing market is hit hit by rising borrowing costs and geopolitical uncertainty.
Lender Lloyds has reported this morning that house prices fell by 0.4% in August, compared with a year ago, which is the first year-on-year decrease since November 2023.
On a monthly basis, prices fell by 0.2% in August, following a 0.1% drop in July, meaning the average property now costs £298,468, on Lloyds’s index.
This is weaker than expected – economists had forecast a 0.1% monthly rise, and a 0.2% increase compared with a year ago.
Andrew Asaam, mortgages director at Lloyds, explains that the market remains subdued in August:
“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.
“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.
And there may be worse to come – as the recent bond market turmoil has pushed up lenders’ borrowing costs.
That increase in ‘swap rates’ could make mortgages more expensive, leaving buyers with less firepower in the market.
The agenda
7am BST: Lloyds house price index
7am BST: German industrial output data for July
Today: UK chancellor John Healey outlines his economic agenda
Here’s some early reaction to this morning’s news that UK house fell, on an annual basis, in August for the first time since November 2023:
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.”
“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.”
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.”
“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.”
Mark Harris, chief executive of mortgage broker 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, before coming back down a little. “Until we have a confirmed end to the conflict we expect this pattern of volatility to continue – borrowers need to be aware and take steps to secure rates well ahead of their current deals expiring. “First-time buyers will be encouraged by the dip in house prices. Lenders are working hard to offer solutions to those trying to get on the ladder for the first time, which is leading to a small improvement in their numbers.”
“With tensions in the Middle East simmering once more and the price of oil moving higher, Swap rates - which underpin mortgage pricing - jumped, before coming back down a little.
“Until we have a confirmed end to the conflict we expect this pattern of volatility to continue – borrowers need to be aware and take steps to secure rates well ahead of their current deals expiring.
“First-time buyers will be encouraged by the dip in house prices. Lenders are working hard to offer solutions to those trying to get on the ladder for the first time, which is leading to a small improvement in their numbers.”
Lloyds also reports that prices fell more sharply in the South of England in August, but rose in the North, and in Wales, Scotland and Northern Ireland.
Prices fell in the South because of the “greater affordability challenge caused by higher average prices”, the bank reports.
The South East saw the largest decline, with prices down -1.6% year-on-year to £381,729.
In Greater London, where prices fell -1.5% to £534,177.
The South West and Eastern England both recorded annual declines of -1.2%.
But, there was growth elsewhere….
Northern Ireland continues to record the strongest annual growth, with prices up +6.9% year-on-year.
Prices in Scotland rose by +3.5% over the past year.
In Wales, annual growth stands at +0.6%.
In the North East of England, prices rose by 2.7% on an annual basis.
In the North West, prices were 2% higher than a year ago.
This chart of average UK house prices underlines how the flat the market has been over the last year:
Lloyds’s Andrew Asaam adds that it’s important to keep the recent drop in house prices in perspective, explaining:
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.”
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.”
