Regional data shows sharper falls in southern England than the north
Lloyds said the annual increase was the weakest since November 2023. Amanda Bryden, the lender’s head of mortgages, said would-be buyers were struggling with affordability and that recent events in the Middle East had prompted mortgage rates to rise.
“While housing demand remains broadly steady, activity continues to respond quickly to changes in mortgage rates,” Bryden said. “Looking ahead, we expect market activity and house prices to remain relatively stable over the remainder of the year. Developments will be shaped by both how mortgage rates respond to the outlook for inflation and wider household confidence.”
The average rate for a two-year fixed residential mortgage stood at 5.63% on Friday, according to the market tracker Moneyfacts. The average five-year deal was 5.67%. Both rates were below 5% at the start of the year.
Rising tensions in the Middle East have fueled fears about inflation and expectations of interest-rate increases this year, according to the report. Lloyds linked the housing market’s July performance to higher borrowing costs, affordability pressures and uncertainty.
Anthony Codling, an analyst at RBC Capital Markets, described the data as a “suspended animation” narrative.
“Prices are neither falling sharply nor rising with any conviction, trapped in a narrow two-year range by the twin vices of stretched affordability and mortgage rates that refuse to fall far enough for long enough,” Codling said. “The market is not in crisis, but the green shoots that flickered briefly in early 2026 have wilted.”
Regional performance varied sharply. Northern Ireland recorded the strongest annual growth, with prices up 7.4% and the average property reaching £231,131.
Prices in Scotland rose 3.6% to an average of £223,246. Wales recorded annual growth of 1.6%, with the average property value reaching £231,458.
In England, the north-east recorded annual growth of 2.8%, taking the average price to £182,488. Prices in the north-west rose 2.1% to £247,836.
The south-east was among the weakest-performing areas, with prices down 2% to an average of £381,146. Greater London recorded a 1.3% decline, leaving the average price at £533,930.
Nicholas Finn, a managing director at London estate agent Garrington Property Finders, said the divide between northern and southern England was “becoming more entrenched.”
“In southern areas, a glut of supply is attracting too few serious buyers, and this is steadily dragging down prices,” Finn said. “In northern England, the forces of supply and demand are more balanced. The buzz surrounding No 10 North, and the prospect of job creation and government investment in northern areas, are boosting sentiment and supporting the upward trajectory in prices.”