In May 2026, UK house prices experienced their first monthly decline of the year, attributed to rising mortgage rates and economic uncertainty impacting the property market. The average home price dropped by 0.6% from April, standing at £278,024. Annual growth in house prices also slowed to 1.7%, a decrease from 3% the month before, highlighting reduced momentum in the housing sector.
With average fixed-rate mortgage deals exceeding 5.6%, the increased borrowing costs have made property purchases more expensive, diminishing affordability and weakening buyer demand. This shift comes during what is typically one of the busiest times of the year for real estate transactions, according to property analysts.
Real estate consultancy Savills has adjusted its forecast for the housing market, now predicting a 2% decline in average UK house prices for 2026. Initially, they had anticipated modest growth. Analysts suggest that the ongoing pressure from high financing costs and broader economic uncertainties will continue to affect the market in the coming months.
Despite the downturn, economists point out that current mortgage rates are still below the peaks reached in 2023. This suggests that if financial markets stabilize and energy prices decrease, the recent weakening in the housing market could be temporary. However, challenges related to affordability and indications of a softer labor market remain significant risks for the sector.