Annual house price growth in the UK slowed to just 2.1% in August 2025, according to the latest figures from Nationwide, highlighting a property market that appears to be pausing for breath after a turbulent year of tax changes, fluctuating interest rates, and persistent affordability concerns. The average UK home now costs £271,079, with the more volatile month-on-month measure showing a 0.1% decline compared to July, as reported by BBC and Forbes Advisor.
This subdued growth marks the slowest annual increase since July 2024 and continues a trend of stagnation, with house price growth either flat or falling in six of the past eight months. The data, based on Nationwide’s mortgage activity, excludes cash purchases and buy-to-let deals, which typically account for about a third of all housing transactions.
“The relatively subdued pace of house price growth is perhaps understandable, given that affordability remains stretched relative to long-term norms,” said Robert Gardner, chief economist at Nationwide, in a statement to Forbes Advisor. “House prices are still high compared to household incomes, making raising a deposit challenging for prospective buyers, especially given the intense cost of living pressures in recent years.”
Mortgage costs remain a significant barrier for many. As of August, the average interest rate on a two-year fixed mortgage stood at 4.96%, while five-year deals averaged 5%, according to Moneyfacts. That’s more than three times higher than the rates seen in the immediate aftermath of the pandemic, putting further pressure on those seeking to enter the housing market or move up the ladder.
Despite the challenges, there are glimmers of hope for potential buyers. The Bank of England cut its base rate to 4% in August, and further reductions are widely anticipated. These moves have already nudged mortgage rates down slightly, and if incomes continue to outpace house prices, affordability could improve in the coming months. “Borrowing costs are likely to moderate a little further if Bank Rate is lowered again in the coming quarters. This should support buyer demand, especially since household balance sheets are strong and labour market conditions are expected to remain solid,” Gardner added.
Yet, the market is not without its headwinds. The government is reportedly mulling a significant overhaul of property taxes in the upcoming Autumn budget, with proposals ranging from a National Insurance levy for landlords to the abolition of stamp duty and the replacement of council tax with a national property tax. According to BBC, these measures are being considered both to raise additional revenue and to stimulate the housing market, but experts are divided on their likely impact. While some argue that scrapping stamp duty could speed up transactions, others warn it could cost billions in lost revenue and introduce new uncertainties.
Speculation over these potential tax changes is already affecting sentiment among buyers, sellers, and landlords. As Capital Economics notes, “The risk is that speculation over possible property tax rises in the Autumn Budget hits buyer sentiment further in the coming months.” The market is still recovering from the impact of the stamp duty increases introduced on April 1, which saw a sharp rise in transactions as buyers rushed to complete purchases before the new rates took effect, followed by a noticeable cooling in activity.
Rightmove data underscores the shifting market dynamics. In August, 34% of properties for sale had their prices reduced, with the average asking price falling by 1.3%—the third consecutive monthly drop. The average asking price nationally now stands at £368,740, and annual asking price inflation has dropped to a mere 0.3%. Regional disparities persist, with all English regions and Scotland recording monthly falls in asking prices, while Wales saw no change. London experienced a particularly sharp decline, with asking prices dropping by 2.6% in August, taking the annual change to a fall of 1.6%.
“Savvy summer sellers have read the room and are coming to market with even more competitive pricing than usual to stand out and attract serious and active buyers,” said Colleen Babcock at Rightmove. “Astute buyers are now benefitting from new seller asking prices which are on average £10,000 cheaper than three months ago. Buyers have the upper hand in this high-supply market, so a tempting price is vital to agree a sale.”
Despite the softening in prices, sales activity remains robust. The number of sales agreed in the summer of 2025 is up 8% year-on-year and is at its highest level since 2020, according to Rightmove. The number of homes on the market has also increased by 10% compared to last year, giving buyers more choice and negotiating power. However, the average time to find a buyer varies considerably: properties priced correctly from the outset sell in just 32 days, while those that require price reductions take an average of 99 days to secure a buyer.
Some estate agents argue that the market is “catching its breath, rather than changing direction.” Jeremy Leaf, a north London estate agent and former RICS residential chairman, observed, “We are not surprised that prices have softened although agreed sales have held up well, supported by slowly improving affordability and recent reductions in the Bank of England Bank Rate. However, with so much property still overhanging the market, many buyers are seizing the opportunity of negotiating hard whereas worried sellers often have no option but to agree revised terms in order for the transaction to proceed.”
Looking ahead, the outlook for the housing market will hinge on several factors: further interest rate decisions by the Bank of England, the government’s final stance on property tax reform, and the broader health of the UK economy. “Sustained momentum will depend on future interest rate decisions and whether upcoming policy decisions support or hinder market activity,” said Karen Noye, mortgage expert at Quilter, speaking to BBC.
In short, while the UK housing market continues to demonstrate resilience in the face of economic uncertainty and policy changes, the coming months are likely to be shaped by the interplay between affordability, buyer sentiment, and government intervention. For now, the market appears to be in a holding pattern, with both buyers and sellers watching closely for the next move from policymakers and lenders alike.
