UK house prices fell unexpectedly in May, marking the third consecutive monthly decline, as rising mortgage rates linked to the conflict in Iran continued to weigh on affordability and buyer demand, according to lender Halifax.
The average price of a typical UK home slipped by 0.1% to £298,806 in May, following falls of 0.1% in April and 0.5% in March. Analysts had forecast a 0.1% rise, but the ongoing Middle East tensions have kept borrowing costs elevated.
Amanda Bryden, head of mortgages at Halifax, said property price trends reflect uncertainty from developments in the region. Despite recent mortgage rate cuts, higher inflation expectations have kept costs above levels seen at the start of the year, stretching affordability for many buyers.
On an annual basis, house prices grew by 0.5%, up slightly from 0.4% in April but well below the expected 1% growth. Bryden said prices were likely to remain broadly stable in the coming months, though Halifax has halved its forecast for annual growth this year.
Mortgage rates remain stubbornly high: the average two-year fixed rate stood at 5.66% on Thursday, up from 4.83% in early March, while the average five-year fixed rate was 5.62%, up from 4.95%. Jason Tebb of OnTheMarket described the current environment as the strongest buyers’ market in years, with ample stock and steady prices reducing the risk of first-time buyers being priced out.
