In May 2026, UK house prices experienced their first monthly decrease as the property market felt the impact of rising mortgage rates and ongoing economic uncertainty. The decline was marked by a 0.6% drop from April, bringing the average home price to £278,024. This slowdown in the housing sector was further highlighted by the annual house price growth, which softened to 1.7% from 3% the previous month, reflecting a shrinking momentum in the market.
The surge in borrowing costs has made home purchases more costly, with average fixed-rate mortgage deals staying above 5.6%. This has caused a reduction in affordability and a dip in buyer demand, even during what is traditionally a peak season for housing activity. Property analysts attribute this downturn to the heightened mortgage rates, which have made it more challenging for prospective buyers to enter the market.
Real estate consultancy Savills has adjusted its forecast for the UK housing market, now predicting a 2% decline in average house prices throughout 2026. This revision comes after earlier expectations of modest growth. Analysts suggest that the continued strain from high financing costs, coupled with broader economic uncertainties, will likely continue to exert pressure on the housing sector in the months ahead.
Despite the current slowdown in the market, economists point out that mortgage rates today remain below the peaks observed in 2023. This indicates that if financial markets achieve stability and energy prices decrease, the current weakness in the housing market might not be a long-term trend. Nonetheless, challenges in affordability and indications of a less robust labor market pose significant risks to the sector’s recovery.