UK house prices rose by 0.8% in August, taking the average property value to £273,000, according to the latest figures from the Office for National Statistics.

The annual rate of house price inflation slowed slightly to 3.0%, down from 3.2% in July, as the market continues to tread cautiously in the face of elevated borrowing costs and economic uncertainty.

The ONS data shows prices increased in all nations of the UK, with the strongest growth in Northern Ireland, where values rose by 5.5% in the year to the second quarter.

Scotland saw prices up 4.0% to an average of £194,000, while England recorded a 2.9% rise to £296,000 and Wales 2.0% to £211,000.

Within England, the North East led the way with annual growth of 6.6%, while London was the only region to see a fall, down 0.3% year on year.

The modest increase in values came as inflation held steady at 3.8% in August, fuelling expectations that the Bank of England will keep interest rates on hold until next year.

RISING STEADILY BUT CAUTIOUSLY

Karen Noye, mortgage spokesperson at Quilter, said: “Average UK house prices rose by 0.8% in August to £273,000, leaving values 3.0% higher than a year ago. That’s a slight slowdown from 3.2% in July, suggesting prices are rising steadily but cautiously as the market navigates high borrowing costs and wider economic uncertainty.”

She added that with inflation still almost double the 2% target, mortgage rates are unlikely to fall significantly in the short term. “For many buyers, affordability remains finely stretched, and that is being reflected in the pace of price growth,” she said.

Noye noted that uncertainty around next month’s Budget was also affecting sentiment. “With rumours swirling around potential housing reforms, from changes to stamp duty to new taxes or reliefs targeted at wealthier homeowners, some people are understandably sitting on their hands until they know where they stand,” she said.

“If the Chancellor does opt for targeted measures aimed at more expensive properties, that could have a cooling effect at the top end of the market, where many transactions are discretionary.”

FURTHER SIGNS OF FLATTENING

Estate agents say this sense of caution is beginning to influence seller behaviour. Amy Reynolds, head of sales at Richmond-based agency Antony Roberts, said: “House-price growth is showing further signs of flattening, which may reinforce the current market caution leading to more sellers adjusting their expectations as to what they can achieve for their homes.

“A sudden drop in prices is not expected as mortgage rates remain relatively low and many have plenty of equity in their homes and stable jobs. Well-priced, well-located homes continue to perform. Affordability remains the brake on the housing market.”

SWAP RATES

From an intermediary perspective, the mood is one of cautious optimism. Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “With inflation holding steady once more in August, there are hopes that it may have finally peaked. Swap rates, which underpin the pricing of mortgage rates, reacted well this morning to the better-than-expected news on inflation.

“Even so, the rate setters at the Bank of England are likely to continue with their cautious approach, with the money markets regarding chances of another interest rate reduction before Christmas as slim and the new year looking more likely.

“With the housing market quieter as some buyers and sellers wait to see what is in the Budget, and with Swap rates falling in the past week, lenders may be tempted to tweak mortgage rates downwards to generate more business.”

AFFORDABILITY PRESSURES

Lee Williams, national sales manager at Saffron for Intermediaries, said: “Today’s data underscores the housing market’s resilience, with prices continuing to edge higher despite growing uncertainty ahead of the Budget. The modest rise reflects steady activity, with limited supply still placing upward pressure on prices.

“All eyes now turn to the Autumn Budget for bold action to reignite momentum. Keir Starmer’s move to amend the Planning Bill and remove barriers to new developments is a necessary step toward the government’s 1.5 million-homes target.

“With affordability pressures persisting, lenders are adapting their products to better support borrowers, making professional advice vital to securing the best deal.”