The latest house price index showed a 0.2% decline in prices during August which followed a 0.1% decline in July.
This means the price of a typical UK property is now £298,468 compared to £299,153 in July. This is the first year-on-year decline in prices since November 2023, Lloyds said.
Despite this, rates are still marginally higher – by 0.2% – since the start of the year, said Andrew Assam, mortgage director at Lloyd’s.
“The housing market has faced a more challenging backdrop in recent months, with the impact of global events on inflation and borrowing costs leading to greater economic uncertainty,” he said.
“What we are not seeing is homeowners rushing to lower prices. But more are choosing to sit idly by, with sellers reluctant to accept offers they feel are too low, while some buyers wait to see how conditions develop.
“As a result, fewer homes are changing hands, with the latest industry figures showing mortgage approvals are now at their lowest level since the start of 2024.”
He also urged homeowners to keep price movements in perspective. “Average house prices are still about 25% higher than they were at the end of 2019, despite the significant increase in interest rates seen over recent years,” he said.
“The market’s adjustment to higher borrowing costs has been gradual, with wage growth helping to offset some of the pressures on affordability. Recent modest price declines are best viewed in this broader context.”
What will happen to house prices in the coming months?
Essam said he expects the market to remain somewhat weak in the coming months, but that will likely have a limited impact on house prices.
“While affordability remains a challenge, wages are continuing to grow, and employment has remained better than many expected,” he said. “This will help support demand from those who need or want to relocate.”
But with the Budget deadline on October 28 looming, others believe the market may rebound once the Finance Minister presents his financial statement.
Amy Reynolds, head of sales at Richmond estate agency Anthony Roberts, said: “We expect September to bring less new inventory to the market than usual, as we head into a second year of ‘wait and see’ ahead of the Budget. Our hope is that there will be a rebound following the Budget and a busy December, setting things up nicely for 2027.”
