UK house prices drop by more than £5,000 in August

The average price of a newly marketed UK home has dropped by more than £5,000 month-on-month in August, as the distractions of school summer holidays traditionally bring a dip in prices.

Across the UK, the typical price tag on a home retreated by 1.5% or £5,705, property platform Rightmove said. The drop pushed the average asking price to £367,785.

The property website said August has seen a monthly decline in prices from July for the last 18 years, with this month’s fall in line with the long-term average.

The reduction is largely attributed to the annual slowdown in market activity during the school summer holidays, when many potential buyers pause their home search. As a result, sellers who list their homes during this period often price more competitively to attract the reduced pool of buyers.

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However, this year’s market presents a unique dynamic. The first Bank of England rate cut in four years, implemented at the start of August, has sparked renewed interest among buyers. Since the rate cut to 5% from a 16-year high of 5.25%, the number of potential buyers contacting estate agents has surged by 19% compared to the same period last year, a significant increase from the 11% rise recorded in July.

This resurgence in buyer activity has prompted Rightmove to revise its 2024 forecast upwards, now anticipating a 1% increase in average asking prices, a shift from the previously predicted 1% decline.

“The first Bank rate cut since 2020 has sparked a welcome late summer boost in buyer activity. While mortgage rates aren’t yet substantially lower since the rate cut, the fact that the long-hoped-for first cut has finally arrived, and mortgage rates are heading downwards, is positive for home-mover sentiment,” Tim Bannister, Rightmove’s director of property science, said.

For first-time buyers, the average asking price — excluding inner London — came in at £227,191, while second-steppers faced a price tag of £340,605. At the top of the ladder, asking prices were on average, £665,492.

London continues to command the higher property prices across the UK, with Kensington and Chelsea at the top.

The market’s momentum is also reflected in the number of sales being agreed, which is 16% higher than during the near-peak mortgage rate period a year ago. Additionally, the number of new sellers entering the market is up by 5% year-on-year, indicating growing confidence among homeowners.

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

While acknowledging that mortgage rates remain high by historical standards, Bannister emphasised the growing optimism among buyers and sellers alike.

“As the summer holiday season comes to an end, the conditions are there for a more active autumn market,” Bannister said. He added that while further Bank rate cuts would be necessary to see substantial reductions in mortgage rates, the current market conditions suggest a brighter outlook for the remainder of the year.

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