The first monthly decline this year comes amid weaker buyer confidence and rising borrowing costs. Annual price growth also slowed as the housing market lost momentum. The UK housing market recorded its first monthly price decline of 2026 in May, with average property values falling as higher mortgage rates and economic uncertainty continued to affect demand.
According to Nationwide’s latest house price index, the average UK home was valued at £278,024 in May, following a 0.6% monthly decline. The fall reversed the 0.4% increase recorded in April and marked the largest monthly drop since June 2025.
Annual house price growth also slowed. Nationwide reported that prices were 1.7% higher than a year earlier, down from the 3% annual increase recorded in April. The figures came in below expectations and reflected a softer market environment.
Consumer Confidence and Buyer Activity Show Signs of Weakness
According to Nationwide chief economist Robert Gardner, a slowdown in the housing market had been anticipated following developments in the Middle East, which contributed to higher energy prices and rising market interest rates.
“Given the uncertainty caused by developments in the Middle East and the subsequent rise in energy prices and market interest rates, some loss of momentum was to be expected,” Gardner said.
Consumer sentiment has weakened noticeably in recent months. Nationwide pointed to data from market research firm GfK showing that consumer confidence fell to its lowest level since late 2023 in April, with only a slight improvement in May.
Housing market sentiment has also deteriorated. According to the Royal Institution of Chartered Surveyors, new buyer enquiries fell sharply in March, reaching their weakest level since 2023 and remaining firmly negative during April.
Reuters reported that the decline in May house prices was the first monthly drop since December and exceeded economists’ forecasts. The news agency also noted that mortgage rates have risen since the outbreak of the Iran conflict, increasing borrowing costs and affecting affordability for prospective buyers.
Estate agents and property analysts said buyers were becoming more price-sensitive. Jason Tebb, president of OnTheMarket, said focused buyers were negotiating firmly while sellers increasingly recognized the difficulty of achieving overly ambitious asking prices.
Experts Point to Affordability Pressures but Note Market Resilience
Several housing market observers said affordability remains a significant challenge despite signs that the market has continued to hold up in some areas.
According to Rightmove data cited by Reuters, the average two-year fixed mortgage rate stood at 5.13% at the end of May, while the average five-year fixed rate was 5.15%. Those figures were roughly half a percentage point higher than a year earlier.
Tom Bill, head of UK residential research at Knight Frank, said the housing market had slowed at a time when activity would normally be expected to strengthen. He argued that higher borrowing costs would continue to affect spending power as older, cheaper mortgage deals expired.
At the same time, some analysts highlighted factors that could help limit further weakness. Gardner said household debt remains low relative to income and that housing affordability had improved in recent years due to wage growth outpacing house price growth.
Nationwide also noted that swap rates, which influence fixed-rate mortgage pricing, remain below the levels seen in 2023 and broadly similar to those prevailing in 2024. Gardner said this offered some confidence that if current economic pressures eased and energy prices normalized, the recent softening in the housing market could prove temporary.
