British house prices fall by more than £5,000 in August

The average price of a new home on the market fell by more than £5,000 in the UK in August compared to the previous month, as the school summer holidays traditionally lead to a drop in prices.

Across the UK, the typical price of a home fell by 1.5 percent, or £5,705, property platform Rightmove said. The decline pushed the average asking price up to £367,785.

The real estate website said that prices in August were the lowest in 18 years compared to July, with this month's decline in line with the long-term average.

The decline is largely due to the annual slowdown in market activity during the school summer holidays, when many potential buyers pause their home searches. As a result, sellers listing their homes during this time often ask for more competitive prices to attract the smaller pool of buyers.

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However, this year's market has a unique dynamic. The Bank of England's first interest rate cut in four years, implemented in early August, has reignited buyer interest. Since the rate cut from a 16-year high of 5.25% to 5%, the number of prospective buyers contacting estate agents has increased by 19% compared to the same period last year, a significant increase from the 11% increase seen in July.

This revival in buyer activity prompted Rightmove to revise its forecast for 2024 upwards. The company now expects average asking prices to increase by 1%, compared to the 1% decline previously forecast.

“The bank's first rate cut since 2020 has led to a welcome increase in buyer activity in late summer. While mortgage rates have not fallen significantly since the rate cut, the fact that the long-awaited first cut has finally happened and mortgage rates are trending downwards is positive for the mood of those moving,” said Tim Bannister, Director of Property Science at Rightmove.

For first-time buyers, the average asking price (excluding Inner London) was £227,191, while second-time buyers paid £340,605. At the top end of the scale, asking prices averaged £665,492.

The story continues

London continues to have the highest property prices in the UK, with Kensington and Chelsea leading the way.

The market's dynamism is also reflected in the number of completed sales, which is 16% higher than during the peak mortgage rate period a year ago. In addition, the number of new sellers entering the market is up 5% year-over-year, indicating growing confidence among homeowners.

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There have also been improvements in mortgage rates, albeit modest ones. The average five-year fixed mortgage rate has fallen to 4.80% from 5.82% a year ago. For buyers with a 40% deposit, the best five-year fixed rate available is now 3.83%, the lowest since before the mini-budget in September 2022.

While Bannister acknowledged that mortgage rates remain high by historical standards, he emphasized growing optimism on both the buyer and seller side.

“With the summer holidays coming to an end, the stage is set for a more active autumn market,” Bannister said. He added that while further rate cuts from banks will be necessary to achieve a significant reduction in mortgage rates, current market conditions suggest a better outlook for the rest of the year.

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