Halifax’s house price index showed that the monthly decline was similar to the 0.1% drop seen in April, while the annual growth was comparable to the 0.4% rise recorded in the year to April.
Amanda Bryden, head of mortgages at Halifax, said: “Property price trends continue to reflect the uncertainty linked to developments in the Middle East. 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 overall activity was still holding up well, reflecting the “underlying resilience of the UK housing market”, adding that transaction levels remained “relatively stable, suggesting buyers and sellers are still moving”.
She added: “Among first‑time buyers, annual growth is more subdued at +0.3%. While getting onto the property ladder remains a big challenge, there has been increasing support from lenders, including more flexible affordability checks and a growing range of low‑deposit options.
“Looking ahead, borrowing costs and consumer confidence are likely to continue shaping activity in the coming months, with house prices expected to be broadly stable while interest rates stay elevated. The housing market remains closely tied to wider global developments, with a return to sustained house price growth dependent on an improvement in the inflation outlook and a fall in mortgage costs.”
Aldermore Insights with Jon Cooper: Edition 9 – Why lending strategy is becoming more central in buy to let
Sponsored by Aldermore
Northern Ireland’s house prices maintain strong growth
The North/South divide continued in May, as property prices in the North performed stronger than in the South.
Northern Ireland continued to lead UK annual price growth, which Halifax said was driven by limited property supply and better affordability.
House prices in Northern Ireland rose by 7.8% annually to £227,117, the highest annual rate of growth in six months.
In Scotland, average house prices were 3.8% higher than the year before at £222,650.
House price growth in Wales continued to slow, rising 0.1% year-on-year to an average value of £230,355.
In England, the Northern regions also recorded the strongest increases in house prices. Average values in the North East rose 3.1% over the year to £181,703, while the North West recorded growth of 3% to £248,304.
In the South East, house prices fell 2.1% year-on-year to £382,704, while values fell 1.5% in London to £534,375.
Not a typical spring market
Tom Bill, head of UK residential research at Knight Frank, said the seasonal spring bounce in the property market had “fallen flat this year”.
He added: “Prices and transaction volumes have been squeezed by higher mortgage rates due to the Middle East conflict and the inflation signals suggest that borrowing costs won’t drop meaningfully in the short term.
“Uncertainty around the political direction of the government and whether any future Chancellor could raise taxes further may also keep demand in check, which means we expect minimal UK house price growth of 1.5% this year.”
Sarah Coles, head of personal finance at AJ Bell, said the property market was “usually flourishing at this time of year”, but May was “decidedly less fruitful for sellers”.
Coles said: “Higher mortgage rates have taken a toll, pushing property prices out of reach for some, and persuading others that now isn’t the time to take the leap. However, an awful lot of this is down to sentiment. Confidence is the engine of the property market, and it’s running on empty right now.
“On the plus side, sales haven’t dried up entirely. There was a positive sign in higher numbers of mortgage approvals in April, which tends to give us an indication of demand in the coming months. However, those buyers will be searching for better bargains and driving a harder bargain, so sellers will need to price realistically to secure sales.”
Easing rates lubricate activity as caution remains
Jason Tebb, president of OnTheMarket, said: “Despite political uncertainty and challenging economic conditions, needs-driven buyers and sellers who may have delayed making moving decisions last year are focused on transacting.”
He said affordability concerns remained but easing mortgage rates were focusing people’s minds and borrowers were adapting to market conditions.
Tebb added: “Little movement in average house prices suggests buyers and sellers are adopting a pragmatic outlook and adjusting expectations, rather than a loss of confidence. Steadier prices are better as far as those trying to get on the ladder for the first time are concerned, as there is less risk of being priced out further, although Halifax notes that their numbers are a little subdued.
“This is the strongest buyer’s market we have seen in many years, with plenty of stock to choose from.”
Mark Harris, chief executive of SPF Private Clients, said falling swap rates were prompting mortgage rate cuts and easing affordability.
However, he said the “steadiness in house prices suggests buyers are still prepared to negotiate hard and are not willing to pay over the odds”.
Harris added: “First-time buyers will be encouraged as house prices remain steady rather than soar. Lenders are working hard on offering solutions to those trying to get on the ladder for the first time, which is leading to a small improvement in their numbers.”
