The average house price in the UK, according to Rightmove, fell by 1.3% from last month. This is a change from the earlier drop of 1.2%. When we look at the yearly trend, UK house prices have gone up by 0.3%. This compares to a smaller gain of 0.1% from the previous year.

Declining Consumer Confidence

This month’s decline in house prices, which is sharper than last month, suggests that consumer confidence is weakening and that people are struggling with affordability. This signals that the Bank of England’s strict monetary policies from 2023 to 2024 are still affecting the economy. Recent data from the Office for National Statistics (ONS) shows that mortgage approvals dropped by 5% in the second quarter of 2025, indicating a slowdown in the housing market. This information makes us believe that the Bank of England may need to consider an interest rate cut sooner than expected, possibly in the fourth quarter. The market is currently only pricing in a small chance of a rate cut by year-end, which presents an opportunity. The most recent consumer price index (CPI) inflation figure from July 2025 fell to 2.3%, giving the Monetary Policy Committee more flexibility to support economic growth. In response, we should look into preparing for lower UK interest rates with SONIA futures. Buying March 2026 contracts could reflect our expectation that the Bank will make moves sooner than the market thinks. A similar situation happened in late 2023 when markets quickly began to expect rate cuts, leading to a rally in fixed-income assets.

Effects on the British Pound and Markets

The possibility of earlier rate cuts may put downward pressure on the British Pound. We may want to buy GBP/USD put options that expire in early 2026 to protect against or speculate on a drop in sterling. The pound has shown strength this year, but a clear shift toward a more dovish stance from the Bank of England could change this quickly. The housing data also affects UK-listed construction firms and banks. We expect these sectors to perform worse than the broader FTSE 100 index in the coming weeks. Traders could use options to create bearish positions on home construction ETFs or specific stocks that depend heavily on the UK housing market. Create your live VT Markets account and start trading now.

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