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UK house prices have fallen for the first time in three years, according to Lloyds, but what does this mean if you’re thinking about remortgaging?
The average house price dipped by 0.4% in the year to August 2026, the first annual drop since November 2023. The average property price stood at £298,468 in August, down £685, or 0.2%, compared with July, the lender’s latest monthly house price index showed.
Here, we look at why house prices are falling, and the impact this is likely to have on homeowners planning to remortgage.
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Want to speak to a mortgage adviser? Speaking to an experienced adviser can help you to understand your options and get a great deal on your mortgage.
If you’re looking for expert mortgage advice, you can get a free consultation with an independent mortgage adviser at Fidelius. Speak with a qualified, FCA-regulated, independent mortgage adviser you can trust. Rated 4.7/5 on VouchedFor from over 2,600 reviews.
Why are house prices falling?
Rising mortgage rates, stretched affordability and ongoing geopolitical uncertainty are putting many people off buying a home or moving up the property ladder. When demand for property reduces, house prices tend to fall.
Andrew Asaam, Mortgages Director at Lloyds Banking Group, said: “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. 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 at their lowest level since the start of 2024”
However, Mr Asaam urged homeowners to keep recent price movements in perspective.
He said: “Average house prices remain around 25% higher than they were at the end of 2019, despite the substantial increase to interest rates seen over recent years. The market’s adjustment to higher borrowing costs has been gradual, with wage growth helping to offset some of the pressure on affordability.
“We expect the market to remain fairly subdued in the months ahead, but this will likely only have a limited impact on house prices. 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.”
Should I remortgage when house prices are falling?
Falling house prices shouldn’t put you off remortgaging if you’re coming to the end of your existing mortgage deal. If you don’t remortgage at this point, then you’ll usually automatically roll over onto your lender’s standard variable rate (SVR). Homeowners who stay on the SVR often pay hundreds of pounds a year more than those on lower-cost fixed or variable deals, although the gap between SVRs and other mortgage rates has narrowed considerably in recent months.
For example, someone with a £150,000 repayment mortgage with 15 years left to run who is borrowing 60% of their property value would be paying £1,359 a month if they were on the typical SVR of 7.13%. Their monthly payments would fall to £1,149 a month if they remortgaged to a best buy two-year fixed mortgage rate of 4.52% – a saving of £210 a month or £2,520 a year.
However, falling house prices may have an impact on which remortgage deals you’re eligible for.
Teddy Cenaj, mortgages expert at Habito, said: “Property prices falling may potentially put you in a higher loan-to-value bracket, aka from 85% to 90% which means that you would potentially end up having to go for a higher rate.
“In general though due the property price increases we have seen over the last few years and the boom we saw during the pandemic, most people should still be in a healthy position to remortgage their property. As always, it’s worth speaking to a broker as they can explain everything in detail and tailor their advice to your personal circumstances.”
It is usually possible to secure your next mortgage deal up to three or sometimes six months before it actually begins, so that you can roll from one deal straight to the next without having to move onto your lender’s SVR in between.
The remortgage process typically takes around six to eight weeks, but can take longer for non-standard cases, so it’s well worth getting started sooner rather than later if your mortgage deal is due to finish soon. In some exceptional cases, if you’re stuck on a particularly high mortgage rate, it may still be worth remortgaging before your current deal ends, even if there are early repayment charges to pay. It’s worth getting a fee-free broker to crunch the numbers on your behalf to see whether it makes financial sense to move to a new deal if early repayment charges still apply.
Advertisement
Want to speak to a mortgage adviser? Speaking to an experienced adviser can help you to understand your options and get a great deal on your mortgage.
If you’re looking for expert mortgage advice, you can get a free consultation with an independent mortgage adviser at Fidelius. Speak with a qualified, FCA-regulated, independent mortgage adviser you can trust. Rated 4.7/5 on VouchedFor from over 2,600 reviews.
Finally…
If you’re panicking about house prices falling, it’s important to remember that recent years have seen some of the biggest house price increases the market has ever witnessed, with property prices still well above pre-pandemic levels.
Falling house prices are only a real problem if you absolutely have to move home, and you owe more on your mortgage than your property is worth, known as negative equity. Find out more about this in our guide What is negative equity and what can you do about it?
If inflation eases next year (and there are no guarantees) and mortgage rates come down, house prices shouldn’t be in decline for too long, especially as there is much greater demand than supply for homes.
However, no one knows for certain what will happen in the future, so if you are worried about house prices falling further, you might want to reduce your mortgage balance by making overpayments if you can afford to.
Check first that your mortgage provider will allow you to do this, and if so, how much they will allow you to overpay without incurring early repayment charges. As a general rule, most lenders will allow you to repay 10% of your mortgage balance each year without penalty. Find out more about making mortgage overpayments in our article Should I consider overpaying my mortgage?
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