UK house prices posted their first monthly decline of 2026 in May as the Middle East conflict pushed up borrowing costs and weakened consumer confidence, with Nationwide data showing the average home lost £856 in value.
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UK house prices fall 0.6% in May as conflict hits buyer confidence
UK house prices posted their first monthly decline of 2026 in May as the Middle East conflict pushed up borrowing costs and weakened consumer confidence, with Nationwide data showing the average home lost £856 in value.
UK house prices fell 0.6% month-on-month in May, the first decline this year, as the Middle East conflict pushed up mortgage rates and eroded buyer confidence, Nationwide Building Society data showed Monday. The average UK home now costs £278,024, down from £278,880 in April, with annual price growth slowing to 1.7% from 3% a month earlier.
"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," said Robert Gardner, chief economist at Nationwide. "Indeed, consumer confidence has weakened noticeably since the start of the conflict."
The average two-year fixed mortgage rate has risen to 5.77% from 4.25% before the US-Iran conflict began on Feb. 28, according to Moneyfacts data. Halifax, the UK's largest mortgage lender, reported a similar cooling trend, with April prices falling 0.1% to £299,313 and annual growth at just 0.4%. The Bank of England held its benchmark rate at 3.75% on April 30, but markets now price a potential increase to 4% at the next Monetary Policy Committee meeting on June 18.
The housing market faces a dual squeeze from rising borrowing costs and household energy bills. The energy price cap will rise 13% to £1,862 on July 1, adding £221 to the average annual household bill, after Brent crude oil surged 43% over the past year to around $94 a barrel. UK inflation fell to 2.8% in April from 3.3% in March, but economists expect May's figure, due June 17, to show an uptick as higher fuel costs feed through to consumer prices.
North-South divide widens as southern markets cool fastest
Regional data reveals a stark geographic split in how the downturn is playing out. Rightmove data showed asking prices in London fell 2.4% year-on-year in May, while the South East dropped 1.6%. In contrast, the North East posted a 2.7% annual increase and the North West rose 2.6%. Nearly a third of homes listed on Rightmove have been reduced from their initial asking price, with reduced properties taking an average of 91 days longer to sell.
First-time buyers have seen some relief, with average asking prices for entry-level homes falling 0.7% year-on-year, outpacing the 0.3% national decline, according to Rightmove. Halifax data showed the average price paid by first-time buyers fell to £238,908, its lowest level this year. Lloyds Banking Group launched a five-year fixed-rate mortgage this week requiring a deposit of just £5,000, targeting first-time buyers struggling with affordability.
"Stable prices will be welcomed by many buyers and sellers looking for greater certainty in the market after a prolonged period of economic volatility," said Nathan Emerson, chief executive of estate agent trade body Propertymark. "Buyers who need to move are continuing to act decisively, particularly where mortgage rates have stabilised."
The outlook hinges on whether the Middle East conflict escalates or eases. A temporary US-Iran ceasefire announced in early April triggered a brief drop in wholesale energy prices, but the Strait of Hormuz supply route remains disrupted, keeping oil prices elevated. The UK economy grew 0.6% in the first quarter, surprising analysts, but the combination of higher mortgage rates, rising energy costs and weakening consumer confidence suggests the housing market may face further softening through the summer months.
This article is for informational purposes only and does not constitute investment advice.
