UK house prices fall for first time in nearly three years

UK house prices fell by 0.4% year on year in August, the first annual drop since November 2023 (Lloyds, reported by the Guardian, 7 September 2026). The average home cost £298,468, down £685 or 0.2% on July. That undershot forecasts: economists polled by Reuters had expected a 0.2% annual rise, the Guardian reported. The number that actually hits your bank account, though, is the rate. The average two-year fixed residential mortgage sat at 5.63% on 7 September (Moneyfacts, cited by the Guardian, 7 September 2026).

What does a 5.63% two-year fix cost per month?

Run the numbers on the UK average. At £298,468, a purchase at 75% LTV (loan to value, the share of the price covered by the mortgage) needs a loan of £223,851. The deposit is £74,617, before the purchase tax due in your nation. Our free stamp duty calculator covers SDLT (stamp duty land tax) in England and Northern Ireland, LBTT in Scotland and LTT in Wales.

On an interest-only basis at 5.63%, that £223,851 loan costs £1,050 a month, or just over £12,600 a year. The five-year average was 5.68% (Moneyfacts, cited by the Guardian, 7 September 2026). Same loan, same basis: £1,060 a month. About £9 a month on the unrounded figures buys you three more years of rate certainty.

Both averages were below 5% at the start of the year, the Guardian reported. Moving from 5% to 5.63% on that same loan adds about £118 a month, or about £1,410 a year. From those sub-5% averages, the real increase is larger still. That is the squeeze buyers are feeling. You may wish to push your own figures through our free BTL (buy-to-let) stress test calculator before you make an offer. It shows whether the rent covers the mortgage at a lender's stressed rate, which is the higher rate lenders use to test affordability.

Where prices fell and where they still rose

The UK average hides a wide split. Northern Ireland led growth, up 6.9% year on year to an average £231,245. Scotland rose 3.5% to £223,437 and Wales rose 0.6% to £230,282 (Lloyds, reported by the Guardian, 7 September 2026).

The north-east and north-west grew, while the south-east and greater London fell. The north-east grew 2.7% to £184,370 and the north-west 2% to £248,675. The south-east posted the largest fall anywhere in the UK, down 1.6% to £381,729, with greater London down 1.5% to £534,177 (Lloyds, reported by the Guardian, 7 September 2026). If a regional switch is on your mind, our property investment strategies hub covers how investors compare areas.

Softer prices cut the cash deposit you need in pounds. They also tend to raise the odds of a down valuation, where the lender values the property below your agreed price. The lender then lends against its own figure, not yours, and you find the difference.

What a buyer and seller standoff means for your offer

Mortgage approvals were at their lowest level since the start of 2024, Lloyds said (Guardian, 7 September 2026). Andrew Asaam, mortgages director at Lloyds, called the market "subdued". "What we're not seeing is a rush of homeowners cutting prices," he said. "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."

Jeremy Leaf, an estate agent in north London, described a "standoff" between nervous buyers and sellers who believe they have already cut as far as they can. "There is more movement when sellers set realistic asking prices from the outset," he said (Guardian, 7 September 2026). Anthony Codling, an analyst at RBC Capital Markets, said the figures show "a market under meaningful pressure from multiple directions" (Guardian, 7 September 2026).

Fewer approvals and slower sales typically mean longer chains and more mortgage offers running out of time. You may wish to ask your broker how long your offer holds and what an extension involves. Our negotiation and finance blog hub covers working with lenders through a slow market.

Key takeaways

• UK house prices fell 0.4% year on year in August to an average £298,468, the first annual decline since November 2023 (Lloyds, reported by the Guardian, 7 September 2026).

• The average two-year fixed residential mortgage was 5.63% and the five-year 5.68% (Moneyfacts, cited by the Guardian, 7 September 2026).

• A 75% LTV loan of £223,851 costs about £1,050 a month interest-only at 5.63%, about £118 a month more than at 5%.

• The south-east fell 1.6% to £381,729, while Northern Ireland rose 6.9% to £231,245 (Lloyds, reported by the Guardian, 7 September 2026).

• Mortgage approvals were at their lowest since the start of 2024 (Lloyds, reported by the Guardian, 7 September 2026).