Lloyds Bank: The first annual decline in home prices in almost three years

According to the bank's most recent house price index, annualized house price declines have been caused by cautious buyers and obstinate sellers

According to Lloyds Bank, average UK home prices decreased by 0.4 percent in the year ending in August 2026 and by 0.2 percent from the month before.

According to Lloyds' most recent house price index (HPI), the average UK property price decreased from 299,569 to 298,468 a year ago.

In August, prices decreased from an average of 299,153 in July.

According to Lloyds data, this is the first time that annual house price growth has trended downward since November 2023. It coincides with rising mortgage rates and a lack of market demand.

Watch the entire video here: Due to the Middle East conflict, lenders have passed on higher wholesale costs to consumers, causing mortgage rates to rise in recent months.

According to data firm Moneyfacts, the average two-year fixed-rate deal is 5.63 percent as of September 7, up from 4.83 percent on February 27, the day before the US began airstrikes on Iran.

According to Andrew Assam, director of mortgages at Lloyds, sellers waiting for better offers and rising mortgage costs are stifling the housing market.

According to Assam, "the impact of global events on inflation and borrowing costs creating greater economic uncertainty has presented a more challenging backdrop for the housing market in recent months."

"A wave of homeowners lowering their prices is not what we are witnessing. However, more are opting to hold off, with some buyers waiting to see how things turn out and sellers hesitant to accept offers they believe are too low. Consequently, fewer homes are being traded."

The North-South divide persists.

According to Lloyds, there is still a significant regional gap in the performance of home prices.

The average property price in Northern Ireland is currently 231,245, up 6.9% from the previous year to August.

Scotland is also experiencing robust growth, with prices increasing by 3.5 percent to an average of 223,437. Wales' property values increased by 0.6% to 230,282 in the year ending in August.

Positive trends were also observed in the North East and North West regions of England, which reported annual increases of 2.7 percent (184,370) and 2.0 percent (248,675), respectively.

In contrast, the narrative in London and southern England is far less favorable.

In the year ending in August, the average house price in the South East decreased by 1.6% to 381,729, while in Greater London, the average property value decreased by 1.5% to 534,177.

With average home prices currently at 298,807 and 331,410, respectively, the South West and Eastern England both saw annual house price declines of 1.2 percent.

A glut of supply in London and the South East of England was "attracting too few serious buyers," which was driving down prices, according to Jonathan Hopper, chief executive officer of search firm Garrington Property Finders.

"Many buyers need a large mortgage in order to afford the home they want, and the jump in interest rates over recent months has squeezed the amount they can afford," Hopper continued, referring to the high property values in these areas.

Customers are now very price-sensitive as a result. Because of this, many people are requesting and receiving price reductions for properties that have been on the market for some time."

According to Hopper, the market was more "free-flowing" in Scotland and northern England, "with prices there still ticking up amid more balanced supply and demand."

What might happen to home prices in the future?

The housing market typically slows down in the summer and picks back up in the fall, which increases demand and gives sellers the chance to raise their asking price.

According to Tom Bill, head of UK residential research at real estate firm Knight Frank, how the Middle East conflict plays out and any potential inflationary effects will determine whether or not that trend materializes this year.

Investment platform AJ Bell's head of personal finance, Sarah Coles, continued: "Life will become even more difficult if the market stagnates and prices stay low.

"When you have to pay higher monthly mortgage costs for a house that might lose value, it's hard to get excited about a purchase. It implies that more purchasers will probably hold off.

"There is a good chance that the market will deteriorate even further at that point. Because sellers are compelled to lower prices, we might witness more widespread declines. Alternatively, since no one is willing to blink, the real estate market may completely stagnate."