In May 2026, the UK housing market experienced its first monthly downturn of the year, with house prices slipping amid an environment of rising mortgage rates and economic uncertainties. The average price of a home fell by 0.6% from April to £278,024, marking a notable decline in the market’s activity. The annual growth rate for house prices also decelerated to 1.7% from 3% in the previous month, signaling a slowdown in the sector’s momentum.
The increased cost of borrowing has rendered property purchases more expensive, as fixed-rate mortgage deals remain above 5.6% on average. This rise in mortgage rates has diminished affordability and dampened buyer interest during what is traditionally one of the most active times for the property market. Property experts note that these financial pressures are contributing to a cooled demand among potential homebuyers.
In response to these developments, real estate consultancy Savills has adjusted its predictions for the housing market, now anticipating a 2% downturn in average UK house prices over the course of 2026. This revision comes after earlier forecasts had suggested modest growth. Analysts attribute the expected decline to the persistent strain of high financing costs coupled with broader economic uncertainty, which are likely to continue impacting the market in the months ahead.
Despite the recent easing in the housing sector, economists point out that current mortgage rates are still below the peak levels reached in 2023. This leaves room for optimism that should financial markets stabilize and energy prices decrease, the recent downturn in the housing market might only be a temporary phase. However, they caution that ongoing affordability issues and indications of a weakening labor market present significant risks that could further challenge the sector.