The figures point to a subdued market in which buyers are becoming more cautious while many sellers remain reluctant to accept lower offers. According to Lloyds Banking Group, mortgage approvals have fallen to their lowest level since the beginning of 2024, while borrowing costs have remained under pressure from movements in financial markets.
Higher Borrowing Costs Are Putting Pressure on Housing Demand
The August decline was weaker than economists had expected. A Reuters poll had indicated an annual increase of 0.2 per cent and a monthly rise of 0.1 per cent. July’s initial estimate of 0.1 per cent growth was also revised to a 0.1 per cent fall.
Andrew Asaam, mortgages director at Lloyds, said the housing market had faced a more difficult environment in recent months as global events affected inflation and borrowing costs. He said homeowners were not rushing to reduce prices, but many sellers were choosing to wait rather than accept offers they considered too low.
Mortgage pricing has also moved higher. According to Moneyfacts, the average two-year fixed residential mortgage rate reached 5.63 per cent on 7 September, while the average five-year fixed rate stood at 5.68 per cent. The number of residential mortgage products available also fell from 7,618 on the previous working day to 7,485.
Fixed mortgage rates are influenced by swap rates, which have risen amid volatility in global bond markets. The five-year swap rate moved above 4.52 per cent during the previous week, its highest level since October 2023. Asaam said the market was likely to remain fairly subdued in the months ahead. He also noted that average house prices remained about 25 per cent higher than at the end of 2019, while wage growth and relatively resilient employment continued to support some demand.
London and the South Record the Sharpest Price Falls
The national figure masks significant regional differences. The north-east of England was the least expensive among these regions, with prices rising 2.7 per cent to an average of £184,370. Scotland followed, recording a 3.5 per cent increase to £223,437, while prices in Wales rose 0.6 per cent to £230,282. Northern Ireland, which recorded the strongest annual growth at 6.9 per cent, reached an average of £231,245. The north-west of England was the most expensive of the group, with prices rising 2 per cent to an average of £248,675.
Southern England moved in the opposite direction. According to Lloyds, the south-east recorded the largest annual decline, with prices falling 1.6 per cent to £381,729. Greater London was down 1.5 per cent to £534,177, while the south-west and eastern England each recorded falls of 1.2 per cent.
The contrast reflects a market in which higher borrowing costs are affecting areas with more expensive property particularly strongly. Lloyds attributed the sharper southern falls to the greater affordability challenge created by higher average prices.
Separate figures from Nationwide Building Society showed a different picture, with prices rising 1.6 per cent annually and 0.2 per cent on the month in August. The latest official data from the Office for National Statistics showed annual UK house-price growth of 2 per cent in June, down from 3 per cent in May.
