UK house prices have experienced their first annual decline since November 2023, with the average property value falling by 0.4% in August compared to the same month in 2025. According to figures from Lloyds, the average home now costs £298,468. This marks a turnaround from the marginal price increases seen earlier in the year.
The previous year-on-year fall occurred in November 2023, following a surge in mortgage rates attributed to concerns over persistent inflation. While current mortgage rates have not reached the peaks of 2023, they have risen since the beginning of the conflict in the Middle East. Average two-year and five-year fixed mortgage rates now stand at approximately 5.6%, up from around 4.9% before the conflict began, according to Moneyfacts data.
Andrew Asaam, mortgages director at Lloyds, noted that sellers are largely holding firm on their asking prices, resulting in fewer property transactions. "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," Asaam stated. "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."
Prices are reportedly under pressure across much of southern England. The South East experienced the most significant annual decrease, with prices down 1.6% to £381,729. Greater London saw a 1.5% drop to £534,177, while the South West and Eastern England recorded 1.2% decreases. Jonathan Hopper, a buying agent at Garrington Property Finders, attributed the price pressure in London and the South East to an oversupply of homes and a reduction in serious buyers. He explained that high property values in these regions necessitate large mortgages, and the recent increase in interest rates has reduced affordability for many potential buyers, making them highly price-sensitive.
In contrast, several regions have seen price growth. Northern England has shown the strongest performance within England, with the North East up 2.7% and the North West up 2%. Scotland reported a 3.5% increase year-on-year, and Northern Ireland saw the largest rise at 6.9%. Hopper commented that the market in northern England and Scotland is more dynamic, with prices continuing to rise due to a more balanced supply and demand. He added that more affordable price ranges are currently the most active.
Lloyds anticipates a subdued market in the coming months, though this is expected to have a limited impact on overall house prices. Asaam added that while affordability remains a concern, growing wages and resilient employment figures are likely to support demand from individuals needing to move.