UK house prices fall for first time in 2026 creating strongest buyers’ market for years as Iran war pressures owners
UK house prices recorded their first monthly dip of the year in May, with the average property value falling 0.6 per cent month-on-month, Nationwide Building Society has reported.
This marks the first decline since a 0.3 per cent decrease in December 2025. Annual house price growth slowed to 1.7 per cent in May, from 3.0 per cent in April, meaning homes are still more expensive than a year ago despite the fall since April.
The average UK house price in May stood at £278,024.
Part of the reason for the mini slump in prices has come due to knock-on effects from the Iran war, with mortgages now more expensive than in February and energy bills on the rise.
Add in that there’s still no end in sight to the conflict and the uncertainty can make some would-be buyers decide to stay put until they are more sure of their longer-term finances.
Affordability also plays a part, while lenders are keeping a close eye on swap rates despite a slight downtick in mortgage deal pricing over the past few weeks.
Robert Gardner, Nationwide’s chief economist, said: “Prices fell by 0.6 per cent month-on-month, after taking account of seasonal effects – the first monthly decline so far this year.
“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.”
Mr Gardner said there has been some positive economic news, but added: “Nevertheless, economic growth is likely to be somewhat weaker and inflation higher than previously expected this year as a result of developments in the Middle East, although the impact will ultimately depend on the duration of the shock and the policy response.
“The UK economy and housing market have proved remarkably resilient in recent years.
“Household finances are solid, with total household debt at its lowest level relative to income for around two decades, and sizeable savings buffers have been built up, though these are not evenly distributed across households.
“Moreover, housing affordability had been improving steadily in recent years due to a combination of income growth outpacing house price growth by a wide margin and a modest decline in borrowing costs.
“While market interest rates have risen in recent months, the impact on affordability has so far been modest.
“Indeed, swap rates, which underpin fixed‑rate mortgage pricing, remain well below the highs reached in 2023 and are broadly in line with levels prevailing in 2024, implying only a partial reversal of earlier gains.
“This provides some confidence that, if the latest shock passes relatively quickly, and energy prices normalise in the quarters ahead, any near-term softening in the housing market will also prove short-lived.”
