Housing Market Slowdown
UK House Prices Decline for Third Consecutive Month as High Mortgage Costs Bite
UK house prices edged down 0.1% in May for the third straight month, according to the Halifax House Price Index, bringing the typical property price to about £298,806 and leaving annual growth at roughly 0.5%, below analyst expectations. The slowdown is tied to elevated mortgage costs and uncertainty from Middle East conflict, which has also pushed up inflation expectations and strained affordability despite some recent mortgage-rate cuts. London and the South East saw sharper year-on-year declines, while regional moves remained mixed, and investors increasingly see a greater risk of Bank of England rate hikes later rather than near-term cuts. Halifax said overall market activity has held up, with transaction levels broadly stable and prices reflecting buyers and sellers adjusting expectations rather than a collapse in demand. However, growth among first-time buyers remains more subdued, even as lenders offer more support through flexible affordability checks and a wider range of low-deposit options. Other data points cited in the coverage—such as Nationwide and surveyor indicators—suggest the cooling is broadening beyond just one measure, with demand and prices easing as borrowing costs stay high.
Key Points
Halifax reported that the average two-year fixed mortgage rate had risen to 5.66% (from 4.83% at the start of March), while average five-year fixed rates had climbed to 5.62% (from 4.95% earlier in the year), citing Moneyfacts—specific figures that help explain the affordability squeeze behind the price cooling.
Halifax’s director forecast cut: the lender “halved its forecast for annual house price growth this year,” reflecting the deteriorating market conditions.
Commentary around the Bank of England meeting was more specific than the summary: City analysis warned a rate rise “cannot be ruled out for the summer,” with policy makers next meeting on 18 June and expected to keep rates on hold—while the risk backdrop included energy-price pressure linked to the Strait of Hormuz being effectively closed (a route used by about a fifth of global seaborne oil and LNG flows).
Other datasets aligned with Halifax’s slowdown but with added detail: Reuters also noted Nationwide had recorded its “first monthly decline since the start of the Iran war,” and that the Royal Institution of Chartered Surveyors showed declines in both prices and demand in April.
Despite the cooling in prices, credit demand was not collapsing: lenders approved the “highest number of mortgages in 15 months” in April, according to Bank of England data cited by Reuters-linked reporting—suggesting transactions can remain resilient even as borrowing costs weigh on the market.
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