UK House Prices Fall Unexpectedly

UK house prices fell unexpectedly in May as rising mortgage rates fuelled by the war in Iran affected affordability and homebuyer demand.

The average price of a typical UK home fell by 0.1% in May to £298,806, the third consecutive monthly drop recorded by the lender Halifax. Analysts had been expecting a return to growth, with a consensus of a 0.1% rise forecast for May. The monthly drop followed falls of 0.1% in April and 0.5% in March.

“Property price trends continue to reflect the uncertainty linked to developments in the Middle East,” comments Amanda Bryden, the head of mortgages at Halifax. “Despite recent cuts to mortgage rates, higher inflation expectations have kept borrowing costs above the level seen at the start of the year, continuing to stretch affordability for many buyers and temper demand.”

Bryden said house prices were expected to “remain broadly stable” in the coming months despite interest rates on mortgages remaining stubbornly high. Halifax has already cut its forecast for annual house price growth this year in half.