House prices record first annual fall since 2023 as mortgage rates remain high

House prices have recorded their first annual fall since 2023, according to the latest figures from Lloyds.While prices are still marginally up since the start of the year, they are now 0.4 per cent below where they were in August 2025.The average property now costs £298,468, according to the bank.The last time property prices fell year-on-year was in November 2023, following a spike in mortgage rates in the summer of that year due to concerns over stubborn inflation.Mortgage rates have also climbed this year following the start of the conflict in the Middle East, though not to the same heights as in 2023.Average two-year and five-year fixed rate deals are now around 5.6 per cent now, up from around 4.9 per cent at the start of the conflict, according to Moneyfacts data. Andrew Asaam, mortgages director at Lloyds, says that sellers are stubbornly holding out rather than cutting their asking prices, which means fewer homes are changing hands. Going down: In August, UK house prices posted their first annual fall since November 2023'The housing market has faced a more difficult backdrop in recent months, with the impact of global events on inflation and borrowing costs creating greater economic uncertainty,' said Asaam.'What we're not seeing is a rush of homeowners cutting prices. But more are choosing to sit tight, with sellers reluctant to accept offers they feel are too low, while some buyers are waiting to see how conditions develop. 'As a result, fewer homes are changing hands, with latest industry figures showing mortgage approvals now at their lowest level since the start of 2024.'Lloyds says that prices are 'under pressure' across much of southern England.The South East saw the largest fall, with prices down 1.6 per cent year-on-year to £381,729. Across Greater London, prices are down 1.5 per cent to £534,177 and in the South West and Eastern England average values fell 1.2 per cent respectively.Buying agent Jonathan Hopper of Garrington Property Finders said that in London and the South East, a glut of homes on the market meant there were fewer serious buyers, which was steadily dragging down prices.He said: 'High property values in these areas mean that many buyers need a large mortgage in order to afford the home they want, and the jump in interest rates over recent months has squeezed the amount they can afford.'This has made buyers highly price-sensitive. As a result many are asking for, and getting, reductions on the prices of properties that have been on the market for a while.'Not all regions across Britain saw prices fall, however.Within England, growth remains strongest in northern regions. The North East saw prices rise by 2.7 per cent and across the North West, prices are up 2 per cent.In Scotland prices have risen even further over the last year, up 3.5 per cent compared to August 2025 and in Northern Ireland prices are up 6.9 per cent.'The market is more free-flowing in northern England and Scotland, with prices there still ticking up amid more balanced supply and demand,' added Hopper.'The more affordable price bands are the most active, as generally speaking motivation levels are higher here.'Lloyds' Asaam also expects the market to remain fairly subdued in the months ahead, but this will likely only have a 'limited impact on house prices.' He adds: 'While affordability remains a challenge, wages continue to grow and employment has held up better than many anticipated. This will help to support demand from those who need or want to move.'Best mortgage rates and how to find them Mortgage rates have shot up again due to inflation triggered by the conflict with Iran reversing hopes that the Bank of England would cut rates. This means those remortgaging or buying a home face higher costs.That makes it even more important to search out the best possible rate for you and get good mortgage advice, whether you are a first-time buyer, home owner or buy-to-let landlord.This is Money's partner L&C can help you with its fee-free mortgage service.> Compare mortgage rates> Find the right mortgage for you To help our readers find the best mortgage, This is Money has partnered with the UK's leading fee-free broker L&C.This is Money and L&C's mortgage calculator can let you compare deals to see which ones suit your home's value and level of deposit.You can compare fixed rate lengths, from two-year fixes, to five-year fixes and ten-year fixes.If you’re ready to find your next mortgage, why not use This is Money and L&C’s online Mortgage Finder? It will search 1,000s of deals from more than 90 different lenders to discover the best deal for you.> Find your best mortgage deal with This is Money and L&C Mortgage service provided by London & Country Mortgages (L&C), which is authorised and regulated by the Financial Conduct Authority (registered number: 143002). The FCA does not regulate most Buy to Let mortgages. Your home or property may be repossessed if you do not keep up repayments on your mortgage.