UK house prices fall for first time this year amid rising interest rates

UK house prices fell in May, with major lenders reporting divergent figures on the scale of the decline amid persistent uncertainty linked to the conflict in Iran.

Halifax reported that the average UK house price fell by 0.1% in May to £298,806, marking the third consecutive monthly drop ^[2]. Nationwide, using a different methodology, recorded a sharper 0.6% monthly decline to an average of £278,024 ^[1]. The two lenders also diverged on annual growth: Halifax calculated a 0.5% year-on-year increase ^[2], while Nationwide reported that the annual pace slowed from 3% in April to 1.7% in May ^[1].

Amanda Bryden, head of mortgages at Halifax, said property price trends continue to reflect the uncertainty linked to developments in the Middle East ^[2]. She noted that despite recent cuts to mortgage rates, higher inflation expectations have kept borrowing costs above levels seen at the start of the year, stretching affordability and tempering demand ^[2].

Halifax has already halved its expectation for annual house price growth this year ^[2]. Bryden added that house prices were expected to remain broadly stable in the coming months ^[2].

Mortgage rates have climbed since early March. The average two-year fixed rate stood at 5.66% on Thursday, up from 4.83%, while the average five-year fix rose to 5.62% from 4.95%, according to Moneyfacts data cited by the Guardian ^[2].

Jason Tebb, president of OnTheMarket, described the current environment as the strongest buyers' market seen in many years, with ample stock available ^[2]. He said little movement in average prices suggests buyers and sellers are adjusting expectations rather than losing confidence ^[2].

Amy Reynolds, head of sales at estate agent Antony Roberts, said the market is defined by a mismatch between cautiously motivated sellers and cost-conscious buyers with genuine negotiating power ^[2].

UK inflation slowed to 2.8% in April, the lowest rate in more than a year, as a reduction in the household energy price cap helped offset a sharp rise in fuel prices since the start of the Middle East conflict ^[2]. However, economists expect inflation to increase in the coming months, partly due to a 13% rise in the energy price cap from July to £1,850 a year ^[2].