The UK housing market experienced its first decline of the year in May 2026, as rising mortgage rates and economic instability led to a slowdown in activity. The average house price fell by 0.6% from April, settling at £278,024. This decline signals a broader trend, with annual house price growth slipping to 1.7% from the previous month’s 3%, highlighting a weakening momentum in the sector.
The increase in borrowing costs has significantly impacted the affordability of purchasing property, with average fixed-rate mortgage deals remaining above 5.6%. This has dampened buyer demand during a period that is typically bustling with activity. The rise in mortgage rates is seen as a key factor contributing to reduced affordability and lower buyer interest.
Real estate consultancy Savills has adjusted its predictions for the housing market, now anticipating a 2% decline in average UK house prices for 2026, a shift from earlier expectations of modest growth. Analysts suggest that persistent pressure from elevated financing costs and wider economic uncertainty will continue to affect the market in the months ahead.
Despite the current slowdown, some economists remain cautiously optimistic, noting that mortgage rates are still below the peaks observed in 2023. They suggest that if financial markets stabilize and energy prices decrease, the recent downturn in the housing market might be short-lived. However, challenges related to affordability and potential signs of a softer labor market continue to pose significant risks for the sector’s recovery.