UK HOUSE prices fell unexpectedly in May, mortgage lender Halifax said on Friday, adding to signs of a slowdown in the housing market as higher borrowing costs and uncertainty linked to the Iran war weighed on demand.
House prices fell 0.1 per cent month-on-month in May, matching the decline recorded in April, Halifax said. It marked the third consecutive monthly fall. Economists polled by Reuters had expected a 0.1 per cent rise.
"Property price trends continue to reflect the uncertainty linked to developments in the Middle East," said Amanda Bryden, 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."
On an annual basis, house prices were up 0.5 per cent, below the 1.0 per cent increase forecast in the Reuters poll.
The figures were in line with data from rival lender Nationwide, which in May reported the first monthly decline since the start of the Iran war.
Data from the Royal Institution of Chartered Surveyors also showed declines in house prices and demand in April.
Average mortgage rates in Britain have risen by almost a full percentage point since the start of the U.S.-Israeli war on Iran. The conflict has also changed expectations around interest rates, with financial markets now expecting the Bank of England to raise rates later this year rather than cut them.
Investors are currently pricing in one or possibly two quarter-point rate rises by the Bank of England by the end of 2026. Markets see only around an 11 per cent chance of a move on June 18 after the central bank's next meeting.
Despite higher borrowing costs, lenders approved the highest number of mortgages in 15 months in April, according to Bank of England data released on Tuesday.
