The Nationwide House Price Index for the UK recorded a 2.1% year-on-year increase in August 2025, down from 2.4% in July. On a monthly basis, prices fell by 0.1%, while forecasts had pointed to a 0.2% increase, following a 0.5% rise in July.
Robert Gardner, Chief Economist at Nationwide, explained that house price growth remains limited due to weak affordability. Prices remain high compared to incomes, while mortgage costs are more than triple pre-pandemic levels. He added that a first-time buyer putting down a 20% deposit now spends about 35% of their net monthly income on mortgage repayments—above the historical average of 30%.
Gardner expects affordability to improve gradually as incomes continue to grow faster than house prices, alongside a potential Bank of England interest rate cut, which would ease borrowing costs.
Housing Market Indicators
- Data on supply shows that average home sizes have risen slightly over the past decade, particularly in terraced houses, while flats have become smaller.
- More than half of owner-occupied homes are considered “under-occupied,” reflecting a growing trend of owning larger spaces than families actually need.
Future Outlook
House price growth in the UK is expected to reach 4.1% by the end of the current quarter. In the longer term, economic models project growth to slow to around 2.7% in 2026 and 2.2% in 2027.
Despite the slowdown in August, the UK housing market remains in a complex position—characterized by high prices and limited access to financing. However, forecasts point to a relative improvement in affordability in the coming years, as incomes rise and borrowing costs decline.
