UK House Prices Flat in July as Affordability Challenges Persist: Lloyds

The UK housing market experienced a period of stagnation in July as prospective buyers contended with rising mortgage rates and broader economic uncertainties. According to the latest index released by Lloyds, a leading UK lender, the average property price effectively remained flat at £299,253 in July. This represents a marginal decrease of just £143 compared to June, indicating minimal movement in the market.

Amanda Bryden, Head of Mortgages at Lloyds, attributed this market inertia to ongoing affordability challenges and the recent uptick in mortgage rates, exacerbated by events in the Middle East. Annually, house prices saw a mere 0.1% increase, marking the weakest rate of growth since November 2023. Property prices have largely remained within a narrow band for nearly two years, sitting only 0.5% higher than their November 2024 levels. While mortgage approvals and completed transactions showed a modest recovery in June, market activity remains highly sensitive to changes in borrowing costs.

Mortgage rates, after a period of easing earlier in the summer, began to climb again in July. Data from market tracker Moneyfacts indicated that the average two-year fixed residential mortgage rate stood at 5.63%, while the average five-year fixed rate reached 5.67%. Both rates were below 5% at the start of the year. Despite the Bank of England (BoE) holding its base rate at 3.75% for the fifth consecutive meeting on July 30, 2026, three members voted for a rate hike, keeping expectations for future increases alive.

Market analysts describe the current situation as being in a state of “suspended animation.” Anthony Codling, an analyst at RBC Capital Markets, noted that prices are neither falling sharply nor rising with conviction, trapped in a narrow two-year range by stretched affordability and mortgage rates that refuse to fall sufficiently. Codling added that while the market is not in crisis, the “green shoots” that briefly appeared in early 2026 have since wilted. Regionally, performance varied across the UK. Northern Ireland recorded the strongest annual growth at 7.4%, followed by Scotland at 3.6%, and Wales at 1.6%. Within England, northern regions like the North East (2.8% annual growth) and the North West (2.1% annual growth) showed better performance, while the South East (2% decline) and Greater London (1.3% decline) experienced price reductions.

Experts highlight a deepening North-South divide in England's property market. Nicholas Finn, managing director at London estate agent Garrington Property Finders, pointed out that an oversupply in southern areas is attracting too few serious buyers, consequently driving down prices. Overall, underlying demand for homeownership remains robust, but affordability continues to be the market's most significant challenge. Mortgage costs remain considerably higher than what buyers have become accustomed to over the past decade.

Looking ahead, Lloyds anticipates that market activity and house prices will remain relatively stable for the remainder of the year. However, this trajectory will depend on how mortgage rates respond to the inflation outlook and the evolution of broader household confidence. Geopolitical tensions in the Middle East, which fuel inflation expectations and potential interest rate hikes, remain key risk factors for the market. Analysts suggest that the housing market will continue to demonstrate sensitivity to global economic and geopolitical developments.