Nationwide data shows the first monthly decline of 2025, with annual growth more than halving from April's rate
UK house prices fell 0.6% month on month in May after seasonal adjustment, according to Nationwide Building Society's latest House Price Index — the first monthly decline recorded this year.
Annual growth slowed sharply to 1.7%, down from 3% in April. The average house price stood at £278,024, compared with £278,880 the previous month.
Nationwide attributed the softening to turbulence triggered by developments in the Middle East, which has pushed energy prices and market interest rates higher.
"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," said Robert Gardner (pictured right), chief economist at Nationwide Building Society.
"Indeed, consumer confidence has weakened noticeably since the start of the conflict, with GfK's headline index falling to its lowest level since late 2023 in April, with only a marginal increase in May."
Housing market indicators have also weakened. Gardner noted that the Royal Institution of Chartered Surveyors (RICS) had reported a sharp fall in new buyer enquiries in March, bringing that index to its lowest reading since 2023, with it remaining deeply negative in April.
Despite the headwinds, the UK economy entered the current period of disruption from a relatively firm position. Output grew 0.6% quarter on quarter in the first three months of the year, and inflation fell more than expected in April.
"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," Gardner said.
On the longer-term picture, he pointed to the resilience of household finances, with total household debt relative to income at its lowest level for around two decades, and to the cumulative improvement in affordability that had built up in recent years through income growth outpacing house price gains.
"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," Gardner said.
"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."
Nathan Emerson (pictured right), chief executive of industry body Propertymark, said the latest figures from Nationwide would reassure those active in the market. "Stable house prices will be welcomed by many buyers and sellers looking for greater certainty in the market after a prolonged period of economic volatility," he said.
"Buyers who need to move are continuing to act decisively, particularly where mortgage rates have stabilised, and supply levels remain constrained. Many households are continuing to carefully assess affordability before making decisions, particularly as mortgage costs remain higher than many borrowers have become accustomed to over recent years.
"However, steady pricing can help support confidence and encourage more balanced negotiations between buyers and sellers."
Mark Harris, chief executive of mortgage broker SPF Private Clients, said the monthly price fall reflected buyer caution. "Falling monthly house prices suggest needs-based buyers are not willing to pay over-the-odds for a property but are negotiating hard," he said.
"Lenders continue to cut their mortgage rates, and the steadiness from the Bank of England in holding base rate should lead to a period of calm after much volatility. Borrowers are taking nothing for granted as the continued high cost of living strains affordability. Many are taking the sensible approach of securing mortgage rates in advance of when needed for peace of mind. Others are keen to proceed with already-reserved rates while they have them."
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