In May 2026, UK house prices experienced their first monthly decrease of the year, primarily due to rising mortgage rates and economic uncertainties that have tempered activity in the property market. The average home price in the UK dropped by 0.6% compared to April, settling at £278,024. This decline is reflected in the annual house price growth, which slowed to 1.7% from April’s 3%, indicating a deceleration in the housing sector’s momentum.
The increase in borrowing costs has made acquiring property more costly, with average fixed-rate mortgage deals remaining above 5.6%. This has led to reduced affordability and constrained buyer demand during a period typically characterized by heightened market activity. In response to these dynamics, property analysts highlight that the hike in mortgage rates is a significant factor contributing to the current market conditions.
Real estate consultancy firm Savills has adjusted its projections for the UK housing market, now anticipating a 2% decline in average house prices for 2026, a revision from their previous outlook of modest growth. Analysts suggest that the persistent pressure from high financing costs and overarching economic uncertainty are likely to continue impacting the market negatively in the forthcoming months.
Despite the current slowdown, economists point out that mortgage rates remain below the peaks observed in 2023. This suggests that if financial markets stabilize and energy prices decrease, the recent downturn in the housing market might be temporary. Nonetheless, ongoing affordability issues and emerging signs of a weaker labor market present significant risks to the sector’s stability and recovery.