UK house prices fell unexpectedly in May, marking the third consecutive monthly decline, as rising mortgage rates driven by the war in Iran and tax plans weighed on affordability and demand. The average price of a typical home dropped by 0.1% to £298,806, according to lender Halifax, defying analyst expectations of a 0.1% rise.
Amanda Bryden, head of mortgages at Halifax, attributed the decline to “uncertainty linked to developments in the Middle East” and higher borrowing costs. “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,” she said.
On an annual basis, house prices grew by 0.5%, up slightly from 0.4% in April but well below the 1% forecast. Bryden predicted prices would “remain broadly stable” in the coming months, though Halifax has halved its forecast for annual growth this year. The average two-year fixed mortgage rate stood at 5.66% on Thursday, up from 4.83% in early March, according to Moneyfacts.
Jason Tebb, president of OnTheMarket, described the market as the “strongest buyers’ market in many years”, with ample stock and pragmatic adjustments from both buyers and sellers. However, Halifax noted that first-time buyer activity remained “more subdued”.
UK inflation slowed to 2.8% in April, its lowest in over a year, but economists expect it to rise due to a 13% increase in the household energy price cap from July. Amy Reynolds of estate agent Antony Roberts called for stability, saying: “This market needs stability and it needs transactions – and frankly, so does the country.”
