House prices dipped by 0.2% in August, following a -0.1% decrease in July, the latest Lloyds house price index shows.
On an annual basis prices have fallen by 0.4%, the first year-on-year decrease since November 2023.
Northern Ireland continues to record the strongest annual growth, with prices up 6.9% year-on-year. While that's a slower pace than seen recently, the average property value now stands at an all-time high of £231,245.
Scotland also continues to see solid growth, with prices rising 3.5% over the past year to an average of £223,437. In Wales, annual growth stands at 0.6%, taking the typical property value to £230,282.
Within England, growth remains strongest in northern regions. The North East recorded annual growth of 2.7%, while the North West saw prices rise 2.0%.
By contrast, price growth remains under pressure across much of southern England, reflecting the greater affordability challenge caused by higher average prices.
The South East saw the largest decline, with prices down 1.6% year-on-year, followed by Greater London, where prices fell 1.5%. The South West and Eastern England both recorded annual declines of 1.2%.
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 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 mortgage approvals now 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 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.”
Jonathan Hopper, CEO of Garrington Property Finders, commented: “A summer slowdown is normal, a slide is not. Summer 2026 has seen both.
“Estate agents are used to the phones going quiet during July and August, but this year saw a fall in both transactions and prices.
“Official data shows the number of homes changing hands in the three months to July fell 4% compared to the previous quarter, and today’s Lloyds data confirms that average prices fell on a monthly basis in both July and August.
“However these national averages mask the gulf between regional markets.
“Over the past year, prices have risen strongly across Scotland and northern England. Meanwhile average prices in London and its surrounding commuter belt continued to slide.
“In August the annual pace of decline eased slightly in South East England to 1.6%, while London saw prices dip by 1.5% over the year. In both areas a glut of supply is attracting too few serious buyers, and this is steadily dragging down prices.
“High property values in these areas mean that many buyers need a large mortgage in order to afford the home they want, and the jump in interest rates over recent months has squeezed the amount they can afford.
“This has made buyers highly price-sensitive. As a result many are asking for, and getting, reductions on the prices of properties that have been on the market for a while.
“Meanwhile struggling sellers are cutting prices pre-emptively to attract interest, with those putting their home on the market now often facing an uncomfortable reality check on their price expectations.
“The market is more free-flowing in northern England and Scotland, with prices there still ticking up amid more balanced supply and demand.
“But sentiment is cautious everywhere, and deals are mostly being done by ‘need to move’ buyers rather than ‘want to move’ buyers. The more affordable price bands are the most active, as generally speaking motivation levels are higher here.
“Today’s weak data is likely to further suppress buyer activity as the prospect of further price falls won’t encourage buyers to rush to do a deal at anything other than a fair price this Autumn. The summer lull is unlikely to turn into a September surge.”
Ian Futcher, financial planner at Quilter, added: “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.”
