The home-buying market update: August 2025
Felicity Holloway, our Head of Mortgages, breaks down key housing and mortgage market updates for August.
Bank of England cuts the base rate
In a highly anticipated decision, the Bank of England’s Monetary Policy Committee (MPC) voted on 7th August to reduce the base rate by 0.25 % down to 4%. This marks the third rate cut of the year, providing a renewed boost of confidence for borrowers and the wider housing market. This decision was finely balanced, however, as the latest inflation data shows a renewed challenge. Headline inflation (CPI) rose to 3.8% in July, up from 3.6% in June. Additionally, core inflation also increased slightly to 3.8% in July.¹ While both measures remain above the Bank’s 2% target, the MPC’s decision suggests it sees enough progress in getting prices to rise more slowly to continue its easing cycle.
What this means for you
- The Bank’s decision to cut rates is a welcome signal that it is now turning its attention to supporting the UK economy, which should translate to lower borrowing costs over time.
- While governor Andrew Bailey has said that the bank will remain “data-dependent”, this move opens the door to potential further rate reductions, which could lead to more affordable mortgage options in the future.
- The Bank’s cautious approach is understandable given the recent uptick in inflation. This means the path to lower rates won’t be a straight line and being prepared for changes is still key for anyone with a variable rate mortgage.
Property tax changes rumoured
While the government’s recently confirmed permanent Mortgage Guarantee Scheme continues to provide long-term support for those with small deposits, the conversation around homeownership is now shifting to property taxes. There has been a great deal of speculation recently about potential changes to taxes like Stamp Duty and Council Tax, which could have a significant impact on both buyers and sellers if confirmed at the Autumn Budget.
To help you understand the speculation and what any confirmed changes could mean for you, we’ve put together a quick breakdown. Read our full analysis of the speculation on property tax changes.
Mortgage rates lower as a result of cost
The Bank of England’s rate decision has already had a positive impact on the mortgage market. Average fixed rates, which had seen a slight uptick in July, have begun to decrease in August. This is translating directly into lower borrowing costs for buyers. Rightmove’s daily mortgage tracker now shows the average two-year fixed rate at 4.49%², reflecting an improving environment for buyer affordability.
House prices show resilience
House price indices for July and August present a fascinating market. To gain the clearest insights, let’s first look at the different lenses each index provides. The key difference is what they measure. The UK HPI looks at completed sales (the most reliable but lagged data), while the others (Rightmove and Nationwide) track asking prices or mortgage lending (more timely indicators of what’s happening right now).
- UK House Price Index (UK HPI): This is the most comprehensive and official measure, based on actual completed sales recorded by the Land Registry. The latest official data shows that average UK house prices rose by 1.4% in June, reaching a new high of £269,000. This demonstrates a strong end to the second quarter of the year, confirming that on a completed-sales basis, prices remain resilient and on an upward trend.³
- Rightmove House Price Index: This index is a leading indicator, based on the asking prices of homes newly listed on the Rightmove platform. In August, the average asking price saw a seasonal monthly drop of -1.3% to £368,740. This marks the third consecutive monthly decline and is a trend we would expect at this time of year as sellers become more realistic to attract summer holiday-distracted buyers.⁴
- Nationwide House Price Index: This index is based on the building society’s own mortgage lending data, offering a timely but more limited view of transaction values. After a slight dip in June, average prices showed a modest monthly increase of 0.6% in July, bringing the average UK house price to £272,664.⁵
What this means for you
- The UK HPI data, which is the most reliable measure, shows strong monthly growth in June, confirming that despite what more recent data suggests, the market is fundamentally resilient.
- The seasonal dips in asking prices, combined with a wider choice of homes on the market, could give you more room to negotiate your offer.
- Don’t be put off by seasonal asking price drops. The solid monthly increase in official price data and high sales activity show that prepared buyers are successfully securing properties.
Mortgage approvals go up
Mortgage approvals for house purchases increased to 65,350 in July, up from 64,170 in June. This continued rise suggests growing buyer confidence and a sustained level of activity in the market, as more individuals more buyers are successfully getting mortgages.⁶
What this could mean for you
- Rising approvals indicate that the market is solid and moving at a consistent pace.
- It reinforces that borrowers are still confidently buying homes, which is a reassuring sign for all buyers.
- This sustained activity suggests that the recent rate cut is boosting market momentum, which should also give you reassurance as you start viewing properties.
Your home may be repossessed if you do not keep up repayments on your mortgage.
1 Source: Office of National Statistics (ONS) CPI Annual Rate of Inflation
2 Source: Rightmove House Price Index for August 2025
3 Source: GOV.UK Land Registry (UK House Price Index for June 2025)
4 Source: Rightmove House Price Index for August 2025
5 Source: Nationwide House Price Index for July 2025
6 Source: Trading Economics, UK Mortgage Approvals for July 2025