Economy June 1, 2026 02:33 AM

UK house prices slip in May as Middle East tensions dent demand, Nationwide reports

Monthly prices fall 0.6% in May - first drop since December - while annual growth cools to 1.7%

By Derek Hwang

British house prices declined 0.6% in May, marking the first monthly fall since December and the largest monthly drop since June 2025, Nationwide said. Annual growth slowed to 1.7% from 3% in April. Mortgage rates have risen amid market expectations of later Bank of England rate hikes following the war in Iran, and surveyors report subdued sales and sentiment, particularly in higher-priced London and southern England.

UK house prices slip in May as Middle East tensions dent demand, Nationwide reports

Key Points

  • Nationwide reported a 0.6% monthly fall in UK house prices in May - the first monthly decline since December and the largest monthly drop since June 2025.
  • Annual house price growth slowed to 1.7% in May from 3% in April, below economists' forecast of a 2.2% rise; rising mortgage rates and weaker consumer confidence are cited as factors.
  • Mortgage lenders and surveyors point to softer sales and sentiment, particularly in pricier London and southern England; average two-year and five-year fixed mortgage rates are around 5.13%-5.15% per Rightmove.

LONDON, June 1 - British house prices fell by 0.6% in May, Nationwide reported on Monday, marking the first monthly decline since December and the largest single-month decrease since June 2025. The fall was steeper than the 0.2% decline forecast in a Reuters poll.

On an annual basis, prices rose 1.7% in May compared with a 3% year-on-year increase in April, coming in below economists' expectations for a 2.2% rise. Nationwide highlighted that momentum in the housing market has softened amid heightened economic uncertainty linked to the war in Iran.

"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," Nationwide chief economist Robert Gardner said. "Consumer confidence has weakened noticeably since the start of the conflict." His comments attribute part of the slowdown to elevated uncertainty and higher costs carried through markets into borrowing costs.

Average mortgage rates have risen since the onset of the Iran war, reflecting market pricing that now anticipates the Bank of England raising interest rates later this year rather than cutting them. Data released by Rightmove on Friday showed the average rate for a two-year fixed mortgage at 5.13% and a five-year fixed rate at 5.15%. Both figures are about half a percentage point higher than a year earlier.

Separate industry indicators also point to softer activity. The Royal Institution of Chartered Surveyors reported that its members recorded the most widespread falls in prices since November 2023 in April and described sales volumes and sentiment as subdued, with the effect most pronounced in higher-priced London and southern England.

Halifax, another leading mortgage lender, reported a 0.1% decline in house prices in April and noted that prices were only 0.4% higher than a year earlier.


The data underline a cooling in UK housing market momentum during May, with mortgage rate moves and geopolitical uncertainty cited as immediate influences on buyer sentiment and market activity.

Risks

  • Geopolitical uncertainty stemming from the war in Iran, which has contributed to weaker consumer confidence and reduced housing market momentum - affecting the housing and mortgage sectors.
  • Higher energy prices and rising market interest rates that have pushed up average mortgage costs, potentially weighing on buyer demand and sales volumes in the real estate and financial sectors.
  • Subdued sales volumes and negative sentiment reported by surveyors, particularly in London and southern England, which could lead to further localized price pressure and lender caution.

More from Economy

Japanese Real Wages Rise for Fourth Straight Month, Strengthening Case for Monetary Tightening Jun 4, 2026 Market Resilience Amidst Sector Shifts: Dow and Russell 2000 Reach New Heights Jun 4, 2026 Australian house price momentum to slow to four-year low as borrowing costs bite Jun 4, 2026 Kevin O’Leary Scales Back Utah Data Center Plan Amid Lawmaker Concerns Jun 4, 2026 Fed's Daly Says AI Could Exert Downward Pressure on Prices Over Several Years Jun 4, 2026