The Halifax is warning that interest rates are set to ‘remain elevated’ for the rest of 2026 – with house prices and transactions likely to stay muted.
It’s latest house price index shows that the typical property now costs £298,806, while the pace of annual growth edged up slightly to +0.5%.
Among first‑time buyers, annual growth is more subdued at +0.3%.
The lender says the price trends reflect 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.
Amanda Bryden, head of mortgages at the lender, says: “Borrowing costs and consumer confidence are likely to continue shaping activity in the coming months, with house prices expected to remain 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.”
As has been the case for many months, Halifax says property prices continue to vary significantly by region and nation, with stronger growth in the North and more subdued conditions in the South.
Northern Ireland continues to lead UK annual house price growth, driven by a limited supply of available properties, along with relative affordability compared to some other regions.
Average prices are up +7.8% over the past year to £227,177, which is the highest rate of annual growth in the last six months.
Scotland also recorded strong annual growth, now at +3.8%, with an average price of £222,650.
Wales has seen property price growth continue to slow, now +0.1% on annual basis, taking the typical home value to £230,355.
In England, stronger price growth remains concentrated in northern regions. The North East saw prices rise +3.1% over the year to £181,703, while the North West recorded annual growth of +3.0%, with the average home now costing £248,304.
By contrast, southern markets continue to see prices fall. The South East led declines, with prices down -2.1% year‑on‑year to £382,704, while London saw average values fall by -1.5% to £534,375
Meanwhile a new survey suggests mortgage borrowers across the UK are turning to shorter term fixes.
Independent mortgage market service Moneyfacts says the share of its
website users comparing two-year fixed-rate mortgages increased from 48.4% in February to 55.6% in May, while demand for five-year fixed deals fell from 27.7% to 21.8% over the same time.
Searches for 10-year fixed-rate mortgages also eased, falling from 6.5% to 4.5%.
Despite the average five-year fixed mortgage rate (5.68%) being lower than the average two-year fixed rate (5.78%) in May, demand continued to shift towards shorter-term deals.
And it says more borrowers appear to be willing to take a calculated risk that they will have the opportunity to refinance sooner at lower rates instead of securing the lowest available rate today.
