This decline comes after prices fell by the same amount in April. Over the year to May 2026, it increased by just 0.5%.
This slowdown is due to the uncertainty resulting from developments in the Middle East.
Amanda Bryden, Head of Mortgage at Halifax, said: “Despite recent cuts in mortgage interest rates, rising inflation expectations have kept borrowing costs above the level seen at the start of the year, continuing to increase affordability for many buyers and dampening demand.
“However, overall activity remained good, reflecting the underlying resilience of the UK housing market. The latest industry figures show that transaction levels remain relatively stable, suggesting that buyers and sellers are still on the move.”
However, it noted that annual growth was 0.3% among first-time buyers. “Although getting onto the property ladder remains a huge challenge, there is increasing support from lenders, including more flexible affordability checks and a growing range of low deposit options,” she said.
Where did home prices rise the most?
Northern Ireland continued to be the country with the highest annual growth, rising by 7.8% over the past year to £227,177 – the highest level in the past six months, according to Halifax.
Scotland also recorded strong annual growth of 3.8%, with an average price of £222,650. But property price growth in Wales has been much slower, at 0.1% per year, taking the value of a typical home to £230,355.
In England, the northern regions were experiencing the strongest growth. The North East saw prices rise by 3.1% over the year to £181,703. In the North West, annual growth was 3.0%, with the average cost of a home now standing at £248,304.
In the south, prices fell. Halifax reported declines in the south-east, where prices fell by 2.1% in the year to May 2026. The typical property price here is now £382,704. In London, average values fell by 1.5% to £534,375.
What is the outlook for property prices for the rest of 2026?
Brayden believes the picture should remain “stable” over the next few months. She said: “Looking ahead, borrowing costs and consumer confidence are likely to continue to shape activity in the coming months, with house prices expected to be broadly stable while interest rates remain high.
“The housing market remains closely linked to broader global developments, with a return to sustainable growth in house prices dependent on improving inflation expectations and lower mortgage costs.”
Meanwhile, mortgage experts say potential buyers, sellers and those remortgaging should prepare for more uncertainty and monitor developments.
“For now, the housing market is likely to remain on weak footing,” said Karen Noe, mortgage expert at Quilter. “While mortgage rates have fallen from recent highs as swap rates stabilized, the improvement has been gradual rather than decisive, and borrowing costs remain high by modern standards.”
“For those looking to buy or remortgage, the environment remains well balanced. Interest rates are no longer moving sharply higher, but there is no clear downward path,” she added.
“In this type of market, staying close to developments and reviewing options early, ideally with professional advice, will leave borrowers better off in the long term.”
