Data released on Monday by the Nationwide Building Society shows that UK house prices fell by 0.6% month-on-month in May. This marks the first monthly decline since December of last year and was driven by a drop in buyer demand due to economic uncertainty stemming from the situation in Iran. The annual rate of house price growth also moderated.
The institution noted that this month-on-month decline was the largest since June 2025 and exceeded the 0.2% drop forecast by a media survey.
While UK house prices were up 3% year-on-year in April, the annual increase slowed to 1.7% in May, falling short of the 2.2% rise economists had anticipated.
Robert Gardner, Chief Economist at Nationwide, stated, "Shifts in the Middle East situation have pushed up energy prices and market interest rates, increasing market uncertainty. It is reasonable that the momentum of housing market growth has slowed somewhat."
"Consumer confidence has clearly weakened since the conflict erupted," he added.
Following the escalation of the Iran situation, market expectations shifted towards the Bank of England potentially raising rather than cutting interest rates this year. This has led to a continued rise in average mortgage rates, increasing borrowing costs for homebuyers.
Data from property website Rightmove last Friday showed the average rate for a two-year fixed-rate mortgage was 5.13%, and for a five-year fixed-rate mortgage was 5.15%. Both rates are approximately 0.5 percentage points higher than a year ago.
The Royal Institution of Chartered Surveyors reported that its members indicated the broadest decline in house prices in April since November 2023. Transaction volumes and market sentiment are generally weak, particularly in high-priced areas like London and southern England.
Data from another major mortgage lender, Halifax, showed UK house prices dipped 0.1% month-on-month in April, with a year-on-year increase of just 0.4%.
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