UK (Parliament Politics Magazine) – UK house prices drop 0.1% to £271,079 in August amid high mortgage costs and affordability pressures slowing market activity.
As reported by The Guardian, the average UK home price slipped 0.1% to £271,079, falling short of the 0.2% rise predicted by economists. The annual pace of Britain house cost growth slowed to 2.1% in August, down from 2.4% in July.
What did Robert Gardner say about rising mortgage costs and buyers’ struggles?
Robert Gardner, Nationwide’s chief economist, said rising borrowing costs are straining buyers and slowing the housing market.
He stated,
“House prices are still high compared with household incomes, making raising a deposit challenging for prospective buyers, especially given the intense cost of living pressures in recent years.”
Mr Gardner added,
“Combined with the fact that mortgage costs are more than three times the levels prevailing in the wake of the pandemic, this means that the cost of servicing a mortgage is also a barrier for many.”
He warned that first-time buyers with a 20% deposit are now paying around 35% of their take-home pay on mortgages. This is above the long-term average of 30%.
Despite the Bank of England cutting the base rate to 4% in August, housing affordability remains under pressure.
Mark Harris’ views on rising mortgage costs
Mark Harris, SPF Private Clients chief, warned that lenders are raising mortgage prices.
He added,
“The mixed picture is down to rising swap rates, which underpin the pricing of fixed-rate mortgages, and lenders not wanting to offer the best rates during the summer months when staff are on holiday and resources are limited.”
What did Verona Frankish say about the housing market outlook?
Verona Frankish, CEO of Yopa, said,
“The market may have paused over the summer, but the annual picture remains one of growth and resilience.”
She stated,
“With the holiday season behind us, attention now turns to the final run-up to Christmas, which is traditionally one of the busiest periods of the year and one of the hard deadlines many buyers and sellers set for their completion data.”
Ms Frankish added,
“The added motivation of moving before the festive season, combined with improving mortgage affordability, should help drive a strong finish to the year for the housing market.”
What did Karen Noye say about mortgage rates and the housing market?
Karen Noye, mortgage expert at Quilter,
“Mortgage rates have been easing slightly, but typical fixed deals remain around 4%, keeping monthly payments elevated, and higher inflation will make the path to lower interest rates even longer.”
She added,
“Speculation around potential reforms in the Chancellor’s upcoming budget, including possible levies on high-value homes or changes to capital gains tax on primary residences, could also cause hesitation among sellers. This would tighten supply further and paradoxically push prices higher, worsening conditions for new entrants to the market.”
What did Alice Haine say about stamp duty and UK house prices?
Alice Haine, personal finance analyst at Bestinvest, said,
“UK house prices fell 0.1% in August, while annual growth softened to 2.1% from 2.4% in July, suggesting the market is struggling to find its feet following the hike in stamp duty costs that came into force in April when thresholds reverted to their previous, lower levels.”
She stated,
“While the summer has seen a surge in homebuying activity, sellers are pricing more realistically in a bid to secure deals at a time when buyers hold the upper hand. Sellers, who initially listed at inflated prices, are increasingly adjusting their asking prices to stay competitive.
Ms Haine added,
“Meanwhile, speculation is mounting over further property tax reforms, just months after the market was forced to absorb the end of the stamp duty break. Chancellor Rachel Reeves is expected to deliver fresh tax hikes at her upcoming fiscal statement amid concerns over the health of the public finances, with property taxation believed to be a target.”
How could rising property taxes and inflation affect UK housing rates?
According to Moneyfacts, the average two-year fixed mortgage rate ended August at 4.96%. A five-year deal averaged 5%.
Elliott Jordan-Doak of Pantheon Macroeconomics warned that potential property tax hikes in Chancellor Rachel Reeves’ autumn budget could disrupt the housing market.
The Treasury is considering a new levy on high-value homes over £500,000, raising concerns over slowing housing sales in London and the southeast.
The central bank cut rates last month but warned that persistent inflation could limit future reductions.
Inflation rose to 3.8% in July, exceeding predictions due to higher food and travel costs. The rate remains above the Bank of England’s 2% target for the tenth consecutive month and may reach 4% next month.
Key facts about the average house price in the UK
As of June 2025, the average UK home price was £269,000. Annual growth rose to 3.7%, up from 2.7% in May.
Regionally, the North East led with 7.8% growth, while London lagged at 0.8%. Experts say affordability pressures continue to challenge buyers across the country.