UK house prices drop at fastest rate in three years, lenders say
Lloyds Banking Group reports a 0.6% monthly decline in UK house prices in October, the steepest fall in three years, attributing the slowdown to higher mortgage rates linked to the conflict in Iran.
Britain’s housing market saw house prices fall for the fourth consecutive month in October, with Lloyds Banking Group reporting an average decline of 0.6% and a year-on-year drop of 1.2%, the steepest since October 2023. Nationwide, the country’s second-largest mortgage lender, estimated a modest 0.5% annual increase, the slowest rate of house-price inflation recorded since January 2024.
Both lenders linked the slowdown to rising mortgage rates, which they said have been driven higher by the war in Iran. >"Housing demand is currently being tested by a challenging economic backdrop," said Andrew Asaam, mortgages director at Lloyds. "Renewed inflationary pressures, driven in part by the conflict in the Middle East, are keeping borrowing costs high and adding to the squeeze on household finances, making some buyers understandably more cautious."
Average mortgage rates have risen above 5%, about one percentage point higher than at the start of the year, adding roughly £150 per month to typical mortgage payments, according to Zoopla analysts. The higher borrowing costs have reduced transaction volumes, with Connells researchers projecting about 1.1 million house sales in 2026, nearly 100,000 fewer than in 2025.
Housebuilder MJ Gleeson noted that sales have improved from a weak summer but remain subdued, and welcomed the government’s upcoming "Your First Home" scheme for first-time buyers, while warning that its delayed launch in April could postpone demand and increase cancellations. Gleeson told shareholders that achieving profit targets will depend on further improvement in buyer confidence.
Capital Economics senior economist Ashley Webb agreed that high mortgage rates will continue to exert downward pressure on house prices, noting that Halifax data suggest the impact could be larger than expected. Regional data showed price gains in Scotland (+2.8% YoY) and the northwest of England (+2.2% YoY), while London recorded a 3.1% annual decline, with the southeast and southwest also seeing falls of 2.4% each.