UK House Prices Fall in May Amid Middle East Uncertainty
British house prices unexpectedly declined in May, according to data released by mortgage lender Halifax on Friday. The drop highlights a cooling property market, as higher borrowing costs and geopolitical uncertainty linked to the Iran war continue to weigh on buyer demand.
Monthly and Annual Price Trends
Halifax reported that house prices fell by 0.1% in May, mirroring the decline seen in April. This marks the third consecutive month of month-on-month decreases. Economists polled by Reuters had predicted a modest 0.1% increase for May. On an annual basis, property prices were up just 0.5%, falling short of the 1.0% increase forecasted in the same poll.
Expert Insights on Market Conditions
Amanda Bryden, Head of Mortgages at Halifax, said: “Property price trends continue to reflect the uncertainty linked to developments in the Middle East.” She added that, despite recent cuts in mortgage rates, inflation expectations have kept borrowing costs higher than at the start of the year. This has stretched affordability for many buyers, dampening demand across the market.
Supporting Data from Other Lenders
The Halifax findings align with reports from rival mortgage lender Nationwide, which recorded the first monthly fall since the onset of the Iran war. Data from the Royal Institution of Chartered Surveyors also showed a decline in both house prices and buyer demand in April.
Rising Mortgage Rates and Bank of England Outlook
Average mortgage rates in the UK have risen by nearly a full percentage point since the start of the U.S.-Israeli conflict in Iran. Market expectations now point to potential interest rate hikes from the Bank of England later this year, rather than cuts. Investors currently anticipate one or possibly two quarter-point rate rises by the end of 2026. However, there is only about an 11% chance of a move at the central bank’s upcoming meeting on June 18.
Mortgage Approvals Despite Higher Costs
Interestingly, despite elevated borrowing costs, lenders approved the highest number of mortgages in 15 months in April, according to Bank of England data released on Tuesday. This suggests that while market demand is cooling, there remains some underlying appetite for property purchases.
