In May 2026, UK house prices experienced their first monthly decline of the year, as rising mortgage rates and economic uncertainty dampened activity in the property market. The average home price across the UK dropped by 0.6% from April, settling at £278,024. This downward trend was reflected in the annual house price growth rate, which slowed to 1.7% from 3% in the previous month, indicating a slowdown in the housing sector.
The increase in borrowing costs has made buying property more expensive, with average fixed-rate mortgage deals staying above 5.6%. This rise in mortgage rates has impacted affordability, subsequently weakening buyer demand during what is usually one of the busiest times of the year 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 in 2026, having previously anticipated modest growth.
Analysts attribute the cooling market to continued pressure from elevated financing costs and broader economic uncertainty, which are expected to weigh on the market in the coming months. Despite the current slowdown, economists note that mortgage rates have not reached the peaks observed in 2023. This suggests that if financial markets stabilize and energy prices decrease, the recent weakness in the housing market could be temporary.
However, challenges surrounding affordability and signs of a softer labor market present ongoing risks for the sector. As the property market navigates these economic headwinds, the outlook remains cautious, with stakeholders closely monitoring how these factors will continue to influence buyer behavior and overall market momentum.