UK house prices fell unexpectedly in May as rising mortgage rates fuelled by the war in Iran affected affordability and homebuyer demand.<\/p>\n
The average price of a typical UK home fell by 0.1% in May to \u00a3298,806, the third consecutive monthly drop recorded by the lender Halifax. Analysts had been expecting a return to growth, with a consensus of a 0.1% rise forecast for May. The monthly drop followed falls of 0.1% in April and 0.5% in March.<\/p>\n
\u201cProperty price trends continue to reflect the uncertainty linked to developments in the Middle East,\u201d said Amanda Bryden, the head of mortgages at Halifax. \u201cDespite 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.\u201d<\/p>\n
Halifax said that on an annual basis house prices grew by 0.5%, up slightly from 0.4% in April, although this was well below analysts\u2019 expectations for 1% growth.<\/p>\n
Bryden said house prices were expected to \u201cremain broadly stable\u201d in the coming months despite interest rates on mortgages remaining stubbornly high. Halifax has already cut its forecast<\/a> for annual house price growth this year in half.<\/p>\n On Thursday the average two-year fixed mortgage rate stood at 5.66%, up from 4.83% at the start of March, according to Moneyfacts. The average five-year fixed-rate mortgage was 5.62%, up from 4.95%.<\/p>\n Jason Tebb, the president of OnTheMarket, said the market had moved in buyers\u2019 favour despite the pressure facing those looking to get on the property ladder or move home.<\/p>\n \u201cThis is the strongest buyers\u2019 market we have seen in many years, with plenty of stock to choose from,\u201d he said. \u201cLittle movement in average house prices suggests buyers and sellers are adopting a pragmatic outlook and adjusting expectations rather than a loss of confidence.<\/p>\n \u201cSteadier 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.\u201d<\/p>\n However, Halifax\u2019s Bryden said the latest figures showed that the growth in activity among first-time buyers was \u201cmore subdued\u201d.<\/p>\n UK inflation slowed to 2.8% in April<\/a>, the lowest rate in more than a year, as a reduction in the household energy price cap helped mitigate a sharp rise in fuel prices since the start of the conflict in the Middle East.<\/p>\n Economists believe inflation is likely to increase in the coming months because of factors including a 13% increase in the household energy price cap<\/a> from July to \u00a31,850 a year.<\/p>\n \u201cThe market is defined by a mismatch,\u201d said Amy Reynolds, the head of sales at the estate agent Antony Roberts. \u201cCautiously motivated sellers [and] cost-conscious buyers with genuine negotiating power. This market needs stability and it needs transactions \u2013 and frankly, so does the country.\u201d<\/p>\n