In May 2026, UK house prices experienced their first monthly decline, reflecting the impact of higher mortgage rates and economic uncertainty on the property market. The average UK home price dropped by 0.6% from April, settling at £278,024. Annual house price growth also decelerated, falling to 1.7% from the previous month’s 3%, indicating a slowdown in the sector.
The rise in borrowing costs has made home purchases more expensive, with average fixed-rate mortgage deals remaining above 5.6%. Property analysts attribute the increased mortgage rates to reduced affordability, which in turn has weakened buyer demand during what is traditionally a busy period for the housing market.
Real estate consultancy Savills has adjusted its forecast for the housing market, now predicting a 2% decline in average UK house prices for 2026, a shift from its earlier expectation of modest growth. Analysts suggest that ongoing pressure from high financing costs and broader economic uncertainty will continue to influence the market negatively in the upcoming months.
Despite this slowdown, economists point out that current mortgage rates are still lower than the peaks observed in 2023. This suggests that if financial markets stabilize and energy prices decrease, the current weakness in the housing market might be temporary. However, challenges related to affordability and indications of a softer labour market remain significant risks for the sector’s future.