Britain’s housing market remained under pressure in May after average property prices recorded another monthly decline, marking the third consecutive drop.
The latest figures suggest that elevated borrowing costs and continued economic uncertainty are making both buyers and sellers increasingly cautious.
The unexpected decline comes as mortgage rates remain significantly higher than they were earlier this year, limiting affordability for many households.
Average Home Value Slips Again
New data from Halifax shows the average UK home was valued at £298,806 in May, representing a 0.1% monthly decline.
Economists had expected prices to edge higher by the same margin, making the latest result an unwelcome surprise for the market.
The latest fall follows a 0.5% decline in March and another 0.1% drop in April, extending a downward trend that has persisted through the spring.
Middle East Tensions Continue to Influence the Market
According to Halifax’s Head of Mortgages, Amanda Bryden, global events have continued to shape the domestic property market.
She said uncertainty stemming from developments in the Middle East has contributed to higher mortgage costs, which in turn have weakened demand from prospective homebuyers.
As borrowing becomes more expensive, many buyers are delaying purchases or lowering their budgets, while sellers are adjusting expectations in response to softer demand.
Annual Growth Remains Far Below Expectations
Although house prices were still higher than they were a year ago, the pace of annual growth remained subdued.
Property values increased 0.5% compared with May last year, slightly improving on April’s 0.4% annual rise.
However, the figure fell well short of analysts’ expectations of 1% annual growth, highlighting the challenges facing the housing sector.
Reflecting the slower outlook, Halifax has also reduced its forecast for house price growth during the remainder of the year.
Mortgage Rates Continue to Weigh on Affordability
One of the biggest obstacles for buyers remains the cost of borrowing.
Data from Moneyfacts shows the average two-year fixed-rate mortgage has climbed to 5.66%, compared with 4.83% in March.
The sharp increase has made monthly repayments considerably more expensive, particularly for first-time buyers entering the market.
Higher financing costs continue to reduce purchasing power, forcing many households to reconsider their plans.
Buyers Gain More Negotiating Power
Property experts say the current market conditions are shifting the balance in favour of buyers.
Jason Tebb of OnTheMarket described the current landscape as one of the strongest buyers’ markets seen in years, with more properties available for sale and less competition between purchasers.
However, Bryden noted that activity among first-time buyers remains relatively weak because affordability pressures continue to limit demand.
Inflation and Energy Costs Add Fresh Pressure
While UK inflation eased to 2.8% in April, economists expect price pressures to increase again after the household energy price cap rises in July.
Amy Reynolds of Antony Roberts said the market is currently characterised by a disconnect between sellers and buyers.
Many homeowners remain reluctant to reduce asking prices, while buyers, facing higher living costs and expensive mortgages, are negotiating aggressively before committing to purchases.
Unless borrowing costs begin to ease, analysts believe the UK housing market could remain subdued in the coming months as affordability continues to challenge prospective buyers.
