UK house prices unexpectedly fell in May, as the Iran war fuelled rising mortgage rates and dampened homebuyer demand.
The average property price edged down 0.1% to £298,806, compared with £299,251 in April, according to the latest data from Halifax. It follows a similar 0.1% drop in April.
The figures are lower than analysts’ expectations, which had widely expected a return to growth.
Amanda Bryden, head of mortgages at Halifax, said: “Property price trends continue to reflect the uncertainty linked to developments in the Middle East. Despite recent cuts to mortgage rates, higher inflation expectations have kept borrowing costs above the level seen at the start of the year, continuing to stretch affordability for many buyers and temper demand.”
However, Halifax said that overall activity has held up well, with transaction levels remaining relatively stable.
On an annual basis, house prices grew by 0.5%, up marginally from 0.4% in April. Among first-time buyers, annual growth was more subdued at 0.3%.
Bryden said: “Looking ahead, borrowing costs and consumer confidence are likely to continue shaping activity in the coming months, with house prices expected to remain broadly stable while interest rates stay elevated. The housing market remains closely tied to wider global developments, with a return to sustained house price growth dependent on an improvement in the inflation outlook and a fall in mortgage costs.”
Separate research from Twenty7tec showed that mortgage activity fell in May, with total mortgage searches down 7% month-on-month at 1,590,911. The figure is 15% lower than May 2025.
Sarah Coles, head of personal finance at AJ Bell, said: “The property market is usually flourishing at this time of year, with new growth springing up and brighter days bringing buyers back in droves. This May was decidedly less fruitful for sellers.
“Higher mortgage rates have taken a toll, pushing property prices out of reach for some, and persuading others that now isn’t the time to take the leap. However, an awful lot of this is down to sentiment. Confidence is the engine of the property market, and it’s running on empty right now.”
Main image: ierra-mallorca-JXI2Ap8dTNc-unsplash
