In May 2026, the UK housing market experienced its first monthly price dip of the year, with home values affected by rising mortgage rates and economic uncertainties. The average UK house price decreased by 0.6% from the previous month, settling at £278,024. Annual growth rates also showed signs of slowing, dropping to 1.7% from 3% in April, reflecting a decelerating trend in the sector.
The surge in borrowing costs has made home purchasing a more expensive venture, with the average fixed-rate mortgage deals remaining above 5.6%. This increase has led to reduced affordability, consequently dampening buyer demand during what is traditionally a peak period for property transactions. As a result, activity within the housing market has seen a noticeable slowdown.
In light of these developments, Savills, a real estate consultancy, has adjusted its projections for the UK housing market. Where modest growth was once anticipated, they now expect a 2% decline in average house prices throughout 2026. Analysts attribute this revised outlook to the persistent pressure from high financing costs and ongoing economic uncertainty, which they believe will continue to impact the market negatively in the months ahead.
Despite the current downturn, economists highlight that mortgage rates, though elevated, are still below the highs reached in 2023. They suggest that if financial markets achieve stability and energy prices decrease, the recent weakness in the housing market may be short-lived. However, ongoing affordability issues and emerging signs of a softer labour market pose significant risks that could further challenge the sector’s recovery.