Lloyds Bank reports first annual UK house price fall in nearly three years
UK property values have declined on an annual basis for the first time in nearly three years, falling by 0.4% to £298,468 as rising borrowing costs squeeze buyers.
UK property values have declined on an annual basis for the first time in nearly three years, squeezed by rising borrowing costs, global geopolitical tensions, and lingering economic uncertainty. According to data released by Lloyds Bank, average home prices fell by 0.4% in the year to August 2026. The shift marks the first time annual house price growth has trended negatively since November 2023, leaving the typical property valued at £298,468, down from £299,569 a year earlier.
The downturn follows a monthly drop of 0.2% between July and August, when average prices slipped from £299,153, as reported in Yahoo Finance UK. Mortgage rates have ticked upward in recent months as lenders pass on higher wholesale costs triggered by conflict in the Middle East. Data firm Moneyfacts reported that the average two-year fixed-rate mortgage stood at 5.63% as of 7 September, climbing from 4.83% recorded on 27 February, just before initial US airstrikes on Iran.
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Andrew Assam, mortgages director at Lloyds, noted that the market faces a more difficult backdrop.
Assam added:"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."
Andrew Assam, Mortgages Director at Lloyds Bank, via Yahoo Finance
Despite the monthly pullback, Lloyds emphasized that average house prices remain roughly 25% higher than they were at the close of 2019."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."
Andrew Assam, Mortgages Director at Lloyds Bank, via Yahoo Finance
| Region / Nation | Annual Price Change (%) | Average Property Price (£) |
|---|---|---|
| Northern Ireland | +6.9% | £231,245 |
| Scotland | +3.5% | £223,437 |
| North East England | +2.7% | £184,370 |
| North West England | +2.0% | £248,675 |
| Wales | +0.6% | £230,282 |
| South West England | -1.2% | £298,807 |
| Eastern England | -1.2% | £331,410 |
| Greater London | -1.5% | £534,177 |
| South East England | -1.6% | £381,729 |
The figures underline a persistent regional divide across the UK. While northern markets and devolved nations continue to record positive growth—led by Northern Ireland with a 6.9% annual increase and Scotland with a 3.5% rise—southern England and London are bearing the brunt of affordability pressures. Jonathan Hopper, chief executive officer of search agent Garrington Property Finders, pointed to a glut of supply in London and the South East as a primary drag on values, noting that high property values in those areas demand large mortgages that have been severely constrained by recent interest rate jumps.
Hopper explained that many buyers in those southern markets need substantial loans and have become highly price-sensitive, frequently asking for and receiving reductions on properties that have languished on the market. In contrast, Hopper described the market in northern England and Scotland as more free-flowing, where prices continue ticking upward amid balanced supply and demand.
Industry experts warn that sentiment is further dampened by political speculation surrounding upcoming fiscal events. Jason Tebb, president of OnTheMarket, noted that political uncertainty and challenging economic conditions form a heavy backdrop as the market heads toward autumn and another Budget beckons. Sarah Coles, head of personal finance at investment platform AJ Bell, cautioned that prolonged market stagnation could force widespread price cuts if neither buyers nor sellers are prepared to yield.
Coles added that it is difficult to muster enthusiasm for a purchase when buyers face higher monthly mortgage costs for a house that could lose value, meaning more buyers are likely to sit tight. Ian Futcher, a financial planner at wealth manager Quilter, warned that recent volatility in bond markets and sharp rises in swap rates have prompted some lenders to adjust mortgage pricing upwards, pulling the rug out from under first-time buyers who have spent months building deposits.
Market observers will be closely monitoring how the housing sector navigates the autumn months, traditionally a period of increased activity. However, ongoing volatility in swap rates, potential mortgage pricing adjustments, and pre-Budget tax speculation mean that any recovery in transaction volumes is expected to remain measured rather than dramatic.
