In May 2026, UK house prices experienced their first monthly decline of the year, driven by heightened mortgage rates and prevailing economic uncertainty, which have collectively dampened property market activity. The average price of a UK home dropped by 0.6% compared to April, bringing it down to £278,024. This decline in monthly prices accompanies a slowdown in the annual house price growth rate, which decreased to 1.7% from April’s 3%, as the housing market loses steam.
The rise in borrowing costs has significantly impacted the affordability of purchasing property, with average fixed-rate mortgage deals remaining above 5.6%. This increase has led to reduced buyer demand, even during a time of year that typically sees heightened activity in the housing market. Real estate experts attribute the softened demand to the increased financial burden placed on potential buyers.
In light of these developments, Savills, a leading real estate consultancy, has adjusted its forecast for the UK’s housing market. The firm now anticipates a 2% decline in average house prices for 2026, revising its earlier prediction of modest growth. Analysts suggest that persistent pressure from high financing costs and ongoing economic uncertainties will continue to influence the market negatively in the near future.
Despite the current slowdown, economists highlight that mortgage rates remain below the peaks observed in 2023. This suggests that if financial markets stabilize and energy prices decrease, the current fragility of the housing market may be short-lived. Nonetheless, the sector still faces challenges related to affordability and indications of a weakening labor market, which pose significant risks moving forward.