FX.co ★ UK House Price Growth Slows in August

The UK Nationwide House Price Index reported a 2.1% increase in house prices year-on-year for August 2025, a slight deceleration from the 2.4% rise observed in July. On a month-to-month comparison, prices showed a 0.1% decline, contrary to the anticipated 0.2% rise, following a 0.5% increase in July. According to Nationwide’s Chief Economist, Robert Gardner, the sluggish growth in house prices can be attributed to affordability challenges, as prices remain high in relation to incomes, and mortgage costs have surged to more than three times their pre-pandemic levels. Currently, a typical first-time buyer with a 20% down payment allocates approximately 35% of their disposable income to mortgage repayments, surpassing the long-term average of 30%. Gardner predicts a gradual improvement in affordability as incomes grow faster than house prices, and borrowing costs may decline if the Bank of England lowers interest rates. In terms of housing stock, data indicates a slight increase in average floor areas over the past ten years, primarily in terraced houses, while apartments have become smaller. Over half of owner-occupied homes are now deemed "underoccupied," highlighting a shift towards larger living spaces than household requirements might suggest.