In May 2026, the UK housing market experienced its first monthly decline of the year, as the surge in mortgage rates and prevailing economic uncertainties dampened activity across the sector. The average price of a home in the UK dropped by 0.6% from April, settling at £278,024. This decline also reflected in the annual house price growth, which slowed to 1.7% from 3% in April, signaling a notable deceleration in the housing momentum.
The rise in borrowing costs has rendered property purchases more costly, with average fixed-rate mortgage deals remaining above 5.6%. This increase in mortgage rates has, according to property analysts, significantly reduced affordability, thereby weakening buyer demand during what is traditionally one of the busiest times of the year for the housing market.
Real estate experts, including consultancy firm Savills, have adjusted their forecasts for the housing market, now anticipating a 2% reduction in average UK house prices in 2026. This is a stark revision from their earlier expectation of modest growth. Analysts attribute this gloomy outlook to sustained pressure from high financing costs and ongoing economic uncertainties that are likely to burden the market in the upcoming months.
Despite the slowdown, some economists point out that current mortgage rates are still below the peaks witnessed in 2023. They suggest that if financial markets find stability and energy prices decrease, the recent downturn in the housing market might be short-lived. However, they caution that the sector still faces significant risks, principally from affordability issues and emerging signs of a weaker labour market.