In May 2026, the UK housing market experienced its first monthly drop in property prices, attributed to a combination of rising mortgage rates and increasing economic uncertainty. The average cost of a home in the UK decreased by 0.6% compared to April, settling at £278,024. This decline points to a slowdown in the housing sector, with annual house price growth also dropping from 3% in the previous month to 1.7%.
The surge in borrowing costs has made homeownership more expensive, as average fixed-rate mortgage deals have stayed above 5.6%. This rise in mortgage rates has affected affordability, leading to a reduction in buyer demand, even during what is typically one of the most active times of the year for the property market, according to industry experts.
Real estate consultancy Savills has adjusted its predictions for the housing market, now anticipating a 2% decrease in average UK house prices for 2026. This revision comes after earlier expectations of modest growth, as analysts foresee continued strain from high financing costs and overall economic uncertainty affecting the market in the months ahead.
Despite the current slowdown, economists highlight that mortgage rates today are still below the peaks reached in 2023. This suggests that if financial markets stabilize and energy prices decrease, the recent downturn in the housing market might be temporary. Nonetheless, challenges related to affordability and signs of a weakening labor market remain critical concerns for the sector’s future.