The UK housing market just pumped the brakes. House prices fell 0.3% last month—the first drop since May—and it looks like pre-Budget jitters are finally spooking buyers and sellers alike.
According to Halifax’s latest house price index, the average home now costs £298,184. Annual growth? A measly 1.3%, down from 2% the month before. Translation: the market’s cooling fast, and people are getting cautious.
Why Are UK House Prices Falling?
Budget Uncertainty Is Making Everyone Nervous
Here’s the thing: when rumours swirl about property tax hikes, people freeze. And right now, Chancellor Rachel Reeves is reportedly eyeing landlords and homeowners for the next Budget.
What’s on the table? National insurance on rental income, capital gains tax on pricier homes, and even talk of breaking stamp duty into instalments instead of one brutal upfront payment. None of this is confirmed, but the uncertainty alone is enough to make buyers think twice.
Mortgage Rates Are Still Sky-High
Stable doesn’t mean low. Mortgage rates have plateaued, sure, but they’re still uncomfortably high for most buyers. The Bank of England’s reluctance to cut interest rates—thanks to stubborn inflation potentially hitting 4% in September—means cheaper borrowing isn’t coming anytime soon.
Ashley Webb from Capital Economics summed it up: weak employment plus high mortgage rates equals a softer housing market. Add potential Budget tax rises, and 2025 isn’t looking great for property values.
London Bucks the Trend (Of Course)
While the rest of the UK saw prices dip, London property values edged up 0.6%, hitting an average of £543,497. The capital continues to play by its own rules, widening the gap between London and everywhere else.
What Does This Mean for Homebuyers and Sellers?
If you’re selling, you might need to adjust expectations. Tom Bill from Knight Frank put it bluntly: sellers are getting the message that house prices are under pressure. Higher supply, cautious buyers, and Budget fears are all weighing on prices.
If you’re buying, don’t expect bargains just yet. Prices are dipping modestly, but experts predict the market will end the year roughly flat. It’s a waiting game—and patience might actually pay off.
What Happens Next?
The Bank of England’s next interest rate decision comes in early November, but hopes of a cut are fading fast. The UK’s inflation problem is proving harder to crack than in other G7 countries—the OECD even pegged the UK as having the highest inflation in the group.
Until rates drop or Budget clarity arrives, expect the housing market to stay sluggish. Buyers and sellers alike are holding their breath.
Key Takeaways
House prices are falling for the first time since May, driven by Budget uncertainty and high mortgage rates. London’s still doing its own thing, but the rest of the UK is feeling the pinch. If you’re in the market, expect cautious moves and modest price dips through year-end.
Want to stay ahead of housing market shifts? Keep an eye on the November Budget—it could reshape the property landscape.
FAQ
Q1: Why did UK house prices fall in September 2024?
A: House prices dropped 0.3% due to Budget uncertainty, particularly fears around property tax rises, combined with persistently high mortgage rates. Buyers and sellers are both adopting a wait-and-see approach.
Q2: Will house prices continue to fall in the UK?
A: Experts predict modest dips through the rest of the year, with prices ending roughly flat. Much depends on the November Budget and whether the Bank of England cuts interest rates.
Q3: Why are London house prices still rising?
A: London’s property market operates independently, with strong demand and limited supply keeping prices resilient. The average London home now costs £543,497, far above the national average.
Q4: When will the Bank of England cut interest rates?
A: Unlikely in the near term. Inflation is expected to hit 4% in September, making an interest rate cut improbable at the next MPC meeting in early November.
Q5: How will the Budget affect house prices?
A: Potential measures like national insurance on rental income or capital gains tax on expensive homes could dampen the market further. Until details are confirmed, uncertainty is keeping buyers cautious.
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Effective Date: 15th July 2025
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