UK house prices fell in September as higher mortgage costs and economic uncertainty continued to weigh on the housing market. Nationwide Building Society reported a 0.2% monthly decline, while annual house price growth slowed to 0.8%, down from 1.6% in August.
Annual house price growth falls to 0.8%
The average UK home price stood at £274,251 in Nationwide’s monthly index, with prices recording their fourth monthly decline in the past five months. Nationwide’s figures show that the annual rate of house price growth has now fallen to its lowest level since December 2025.
The 0.2% monthly decline in September followed a 0.2% rise in August. The latest fall was weaker than economists had expected, who had forecast no monthly change. Nationwide chief economist Robert Gardner said the housing market had remained subdued amid an uncertain economic backdrop.
He also pointed to higher energy prices and inflation concerns linked to geopolitical tensions, saying these had contributed to expectations of higher Bank of England interest rates and upward pressure on mortgage pricing.
Mortgage rates remain above 5.9%
Borrowing costs remain a major consideration for prospective buyers. According to figures cited by Moneyfacts, the average rate on a two-year fixed mortgage had risen to its highest level since July 2024, while the average five-year fixed rate reached its highest point since October 2023.
Both average rates were above 5.9%. Higher mortgage rates can raise the monthly cost of buying a property, which can affect the amount buyers are able or willing to borrow. The Bank of England‘s future interest-rate decisions will depend on inflation and other economic data.
Market expectations cited in the supplied report pointed to a possible rate increase at the November meeting, although such expectations are subject to change.
Northern Ireland records strongest annual growth
The slowdown has not been uniform across the UK. Northern Ireland recorded the strongest annual house price growth in the third quarter, at 5.9%. The figure was down from 8.6% in the previous quarter.
The North West recorded annual growth of 3.9%, while Scotland and the North each recorded growth of 3.3%. At the other end of the scale, East Anglia recorded the weakest performance, with prices down 0.7% year on year. Southern England also saw weaker annual growth, with prices down 0.1% across the region.
Affordability has improved relative to earnings
Despite higher mortgage rates, Nationwide said underlying affordability has been moving in a more favourable direction because house price growth has remained below earnings growth for some time.
Gardner said these gains had been partly offset by higher mortgage rates. Nationwide’s data also showed differences between property types. Terraced homes recorded annual growth of 1.8% in the third quarter, while prices for flats were broadly unchanged from a year earlier.
First-time buyers face changing market conditions
The slower pace of house price growth could affect prospective first-time buyers in different ways. Lower house price growth can reduce the amount needed to purchase a property, while higher mortgage rates increase the cost of borrowing.
The government is also preparing its Your First Home scheme in England, aimed at helping eligible first-time buyers purchase new-build properties. Under the proposed scheme, buyers would be able to use a government-backed equity loan covering 20% of the purchase price, with a minimum deposit of 2.5%.
The scheme would apply to eligible new-build houses and flats in England.
Housing market outlook remains tied to borrowing costs
Nationwide said housing activity could regain momentum if the energy shock fades, consumer confidence returns and market interest rates move back towards levels seen before the recent conflict.
For now, September’s figures show a housing market with slower annual growth and a monthly decline, while mortgage costs remain a major factor for people considering a move or their first purchase.
