UK house prices slipped slightly in August as many households continued to find it difficult to raise deposits and cope with high monthly mortgage repayments, figures from Nationwide reveal.
After seasonal adjustments, prices fell by 0.1% on a monthly basis. On an annual scale, growth slowed to 2.1%, down from the 2.4% recorded in July.
The average property price now stands at £271,079, edging down from £272,664 the month before.
The slower pace of growth highlights the ongoing affordability squeeze, with homes still priced high compared to household incomes. Combined with rising living costs, this is putting pressure on buyers and limiting demand.
Nationwide’s chief economist Robert Gardner explained that the cooling market was unsurprising given affordability challenges. He noted that property values remain high relative to wages, which makes it particularly hard for first-time buyers to save for a deposit during a period of intense cost of living pressures.
Mortgage rates are also a significant hurdle. Even though expectations of further interest rate rises have eased, borrowing costs remain higher than pre-pandemic levels.
Gardner pointed out that mortgage repayments now take up a far greater share of income. For example, an average earner purchasing a typical first-time buyer property with a 20% deposit could be spending around 35% of their take-home pay on mortgage payments—well above the long-term norm of 30%.
There is hope, however, that conditions may improve gradually. With steady wage growth and the prospect of rate cuts in the months ahead, borrowing costs could start to ease. Gardner added that strong household balance sheets and a resilient jobs market should also support demand.
But affordability challenges aren’t the only concern. Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, highlighted that the market is still adjusting to the rise in stamp duty costs following the reversal of thresholds in April.
She also noted growing speculation about further property tax reforms. Reports suggest measures could include a replacement for stamp duty on homes over £500,000, the potential extension of capital gains tax to main residences, and even changes to council tax. Buy-to-let landlords may also face additional burdens if National Insurance contributions are applied to rental income.
Such proposals, she warned, could create uncertainty for homeowners, landlords, and prospective buyers alike.
Despite these concerns, Nationwide remains cautiously optimistic. Gardner suggested that if wage growth continues to outpace house price increases, affordability should slowly improve.
Elsewhere, Propertymark chief executive Nathan Emerson said transaction numbers appear to be stabilising, with fewer sales falling through in recent months. He added that challenges remain, including boosting housing supply, helping first-time buyers, and ensuring that lower interest rates translate into more affordable mortgage products.
Mark Harris, CEO of mortgage broker SPF Private Clients, observed a mixed approach from lenders, with some raising rates while others reduced them. This, he explained, was influenced by swap rates and seasonal market dynamics, as many lenders avoid offering the most competitive deals during the quieter summer period.
Harris noted that while rates are likely to fluctuate, no major movements are expected in the short term.
Matt Thompson, head of sales at estate agent Chestertons, added that August gave buyers time to review their finances, refine their property search, and revisit shortlisted homes.
Nationwide also revealed trends in property sizes. Since 2013, the average home in England has grown slightly, from 95.3m² to 96.2m². Terraced houses recorded the biggest increase at 3.6%, while the average size of flats dropped by 1.7% to 60.3m².
Owner-occupied homes tend to be the most spacious, averaging 112m², compared with 76m² in the private rental sector and 65m² in the social rented sector.
Even so, UK homes remain smaller than the European average of 103m². Countries such as Norway, the Netherlands and Belgium continue to boast far larger properties than the UK.
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