British house prices recorded their biggest annual fall in three years in October, mortgage lender Lloyds said on Friday, as higher borrowing costs and renewed inflationary pressure weigh on buyers.
Prices fell 0.6% on the month, taking the average UK home to £296,285 — £1,882 less than in September. On the year, prices were 1.2% lower, the steepest annual decline since October 2023.
The drop was larger than economists had expected. A Reuters poll had pointed to a monthly rise of 0.1% and an annual fall of just 0.3%.
“Housing demand is currently being tested by a challenging economic backdrop,” said Andrew Asaam, mortgages director at Lloyds. “Renewed inflationary pressures, driven in part by the conflict in the Middle East, are keeping borrowing costs high and adding to the squeeze on household finances, making some buyers understandably more cautious.”
The figures landed a day after the Bank of England raised its base rate by a quarter of a point to 4%, its first increase in more than three years. UK Finance said the rise would add an average of £30.72 a month to the payments of homeowners on tracker deals, though about 87% of outstanding homeowner mortgages are on fixed rates. Some 2.3 million fixed-rate deals are due to expire in 2027.
The downturn was sharpest in the south. London prices fell 3.1% on the year to an average of £524,892, while the South East and South West both recorded falls of 2.4%. By contrast, prices rose in the North West, up 2.2% to £249,916, and in the North East, up 2.0% to £184,318. Scotland rose 2.8%, Wales 1.6% and Northern Ireland 4.4%.
Lloyds nevertheless played down the prospect of a sustained slide. Asaam said prices had “changed relatively little over the past couple of years” and that, with wages rising faster than property prices, affordability should gradually improve. “Looking ahead, conditions are likely to remain subdued in the near term, but we don’t expect this to lead to a sustained period of falling house prices,” he said.
Separate figures from Nationwide pointed in the same direction, with annual house price growth slowing to 0.5% in October, its weakest since January 2024, and prices flat on the month.
For first-time buyers, the softer market may offer some relief. David Hollingworth of mortgage broker L&C said some would find “less competition” and “time to consider their options and potentially negotiate a little harder”.
Sources: Reuters (https://www.tradingview.com/news/reuters.com,2026:newsml_L5N46M2LL:0-uk-house-prices-fell-unexpectedly-in-october-lloyds-says/); The Oldham Times (https://www.theoldhamtimes.co.uk/news/national/26704323.lloyds-records-biggest-annual-fall-uk-house-prices-three-years/); The Intermediary (https://theintermediary.co.uk/2026/11/uk-house-prices-fall-1-2-annually-in-biggest-decline-since-october-2023/)
