Market Velocity Stalls: May 2026 Housing Market Report
- The war in Iran continues to stall the housing market.
- House prices remain close to record highs at £284,862 in England & Wales.
- The Housing Market is in the middle of a mortgage affordability crisis.
- Remortgage approvals are at their highest since the financial crisis in 2008.
- The Base Rate is likely to remain at 3.75% when the committee meets in June.
The UK property market enters May 2026 operating under a fundamentally rewritten set of rules, after the Bank of England's recent pivot to a 3.75% base rate triggered an aggressive restructuring of mortgage pricing. While a cooling labour market injects widespread consumer caution and heightens transactional chain risks, savvy lenders are quietly shifting from volatile headline interest rates to higher upfront fee structures to protect affordability metrics
For active buyers and sellers, navigating this spring season requires looking beyond top-line asking prices and focusing on market velocity, mortgage underwriting friction, and the hidden operational bottlenecks slowing the legal pipeline.
UK house prices fall in May
Nationwide Building Society's data shows that house prices throughout the UK fell by 0.6% in May, the first fall since December last year. They feel the fall is directly related to the economic uncertainty stemming from the war in Iran. Weakening house prices also aligned with declining consumer sentiment in the property market, with the Royal Institution of Chartered Surveyors recording a sharp fall in new buyer enquiries in March.
Consumer confidence had weakened noticeably since the start of the Iran conflict, and 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
Source: Robert Gardner, Chief Economist at Nationwide
The housing market is weakening
According to the latest monthly survey from the Royal Institution of Chartered Surveyors (RICS), the UK housing market has subdued as fears over higher mortgage rates and rising inflation weigh on demand. It reported a “noticeable softening” in demand from potential homebuyers across England and Wales.
A net balance of 34 per cent of RICS members said new buyer inquiries fell in April compared with the previous month. RICS also suggested that house price expectations would weaken in the months ahead
Until there is a clearer path for inflation and borrowing costs, activity and sentiment look set to remain subdued, particularly across southern England and London where affordability pressures are most acute
Source: Tarrant Parsons, Head of Market Research and Analysis at the RICS
Mortgage affordability tightest since 2008
UK Finance has published a new Lending Where We Live report revealing a sharp difference in mortgage affordability and buy‑to‑let (BTL) returns across the UK.
At a UK level, homebuyers spend on average just over a fifth (21.3 per cent) of their gross income on their mortgage – the highest level since 2008. Borrowers in two places – North Norfolk in East Anglia (25.7 per cent) and the London Borough of Hillingdon (25.1 per cent) - spent over a quarter of their gross income on mortgage repayments.
It’s been challenging times for those trying to buy a property in recent years, with affordability pressures weighing heavily. But the pain is not felt equally across the country. Property prices, wages and demographics vary greatly across and within regions. All of these affect affordability and, if you’re a landlord, how profitable your investment property is.
Source: James Tatch, Head of Analytics at UK Finance
Mortgage lenders change their products
Mortgage lenders are being more creative with their mortgage products to make them appear more affordable. Recent Bank of England research reveals a structural "fee–rate substitution" mechanism that has fundamentally transformed the architecture of mortgage products. Rather than passing the full brunt of volatile swap rate increases directly into headline interest rates, mortgage lenders, particularly specialist lenders, are increasingly suppressing the initial interest rate and offsetting the risk by hiking upfront arrangement fees.
In some cases, mortgage applicants can add the arrangement fee to the mortgage debt and pay it off over the lifetime of the mortgage. This might appear to be a good idea; however, if you add a £1,999 arrangement fee to your mortgage at a rate of 4.5% over a 25-year term, the total amount you repay will be £3,334. By adding it to the loan, that upfront cost increases by over 65% by the time the mortgage is fully paid off.
Almost 90% of workers cannot afford to buy a home alone
According to the latest data from Savills, almost 90% of people in work do not earn enough to buy their own home. They estimated that the average single person would need to earn £65,520 a year to afford the UK’s average house price of £346,744; a salary earned by just 11 per cent of people. Savills highlighted the benefits of having two incomes when buying a property, as well as access to family support for a deposit.
Difficulties for single buyers are likely to become an entrenched feature of the housing market. The relaxation of mortgage rules will ease some of the affordability challenges, but for that to really affect a wider pool of first-time buyers, you need to see mortgage rates drop
Source: Lucian Cook, Head of Residential Research at Savills
How the job market affects the housing market
A weakening employment market acts as a major handbrake on the housing market because it fundamentally damages both a buyer's ability to pay and their confidence to borrow. While interest rates dictate the cost of money, the labour market dictates access to it. When employment conditions cool, as we're currently seeing with rising corporate caution and dropping vacancy rates, the ripple effects break down the property transaction pipeline in three distinct phases:
- 1
Tightening Lender Affordability
Lenders do not just look at what a borrower earns today; they assess the stability of that income moving forward. In a weakening job market, high-street banks anticipate income shocks. They tighten their affordability calculators, reduce the income multiples they are willing to lend (e.g., from 4.5x income to 4.0x), and scrutinise variable income, such as bonuses or overtime.
- 2
Down-Valuations
A cooling job market directly translates into lower buyer demand, which stalls market momentum. When employment certainty drops, fewer buyers submit bids, and properties sit on the market for longer. Mortgage surveyors track these micro-trends closely. If they see local demand softening due to local economic strain or redundancies, they become highly conservative. You can read our guide to combat this: Bank Undervalued Property: What You Can Do
- 3
Cautious Demand
Property purchases are heavily driven by consumer sentiment. Buying a home requires a massive, long-term financial commitment. Even if an individual's job is perfectly secure, widespread media reports of a weakening job market or restructuring within their industry create caution. Buyers choose to stay put, extend their current tenancies, or pause their property search rather than taking on a larger debt commitment. This drop in transaction volumes thins out the pool of buyers, giving the remaining active buyers more leverage to renegotiate lower prices, further slowing market velocity.
Mortgage affordability is at its tightest level since 2008
UK Finance has published a new Lending Where We Live report revealing a sharp difference in mortgage affordability and buy‑to‑let (BTL) returns across the UK. As a whole, homebuyers spend on average just over a fifth (21%) of their gross income on their mortgage, the highest level since 2008. These are different when you look at the local data. Borrowers in North Norfolk in East Anglia (26%) and the London Borough of Hillingdon (25%) spent over a quarter of their gross income on mortgage repayments.
Despite various challenges in the BTL sector, data showed that all regions of the UK saw growth in BTL purchase activity in 2025, with different regions showing varying levels of profitability for landlords
It’s been challenging times for those trying to buy a property in recent years, with affordability pressures weighing heavy. But the pain is not felt equally across the country. Property prices, wages and demographics vary greatly across and within regions. All of these have an impact on affordability and if you’re a landlord, how profitable your investment property is
Source: James Tatch, Head of Analytics at UK Finance
Will mortgage rates go down in June 2026?
According to the latest Office for National Statistics (ONS) data, headline UK inflation (CPI) fell to 2.8% in the 12 months to April, down from 3.3% in March. While a sharp reduction in household energy costs following the April price cap implementation was the primary driver behind this drop, the moderation is likely to be short-lived. The Bank of England remains acutely aware that near-term inflation is projected to climb later this year as the temporary relief from lower energy bills fades, compounded by the ongoing geopolitical conflict in the Middle East, which continues to put upward pressure on motor fuel and supply chain costs.
Consequently, any expectations of imminent mortgage rate relief in June are premature. The Monetary Policy Committee (MPC) is highly likely to hold the base rate steady at 3.75% at its June 18 review, amid ongoing data volatility. Looking further into the summer, if core services inflation remains stubborn and energy markets continue to re-inflate, a defensive pivot cannot be ruled out, with the market increasingly pricing in a potential push up to 4% by the third quarter to anchor long-term inflation expectations.
The upcoming MPC announcements on Bank Rates are on the 18th June, 30th July, 17th September, 5th November, and 17th December.
Sales volume Stalls
England & Wales
Sales volume of property across England and Wales remains subdued, down 36% YoY in the latest HPI data for January 2026. The average house price remained close to the record high at £284,862 in March 2026. This, however, is the first month of no year-on-year growth since April 2024.
London
London continues to face challenges. The average property price is £542,065 (March 2026), a 2% YoY decrease. House prices in London have been lower year-on-year for eight consecutive months.
Mortgage approval reports
Home buyers:
Net mortgage approvals for house purchases rose to 65,900 in April 2026—a 9% year-on-year increase that pushes transaction volumes well above the rolling six-month average of 63,100. This clear upward trajectory demonstrates strong underlying buyer resilience, with transaction pipelines approaching pre-pandemic benchmarks despite ongoing geopolitical tensions in the Middle East and subsequent swap rate volatility.Remortgages:
Remortgage approvals held steady at 51,300 in April 2026. This sustained high volume reflects an active refinancing wave, tracking near its highest level since the post-2022 mini-budget repricing shocks as borrowers proactively secure lines of credit ahead of anticipated long-term lending changes.
Lowest new build completions since lockdown
Housing completions grew in the final quarter of 2025, ending 5 quarters of no growth. However, with a Government-set quarterly target of 300,000 new homes a year (75,000 per month), the 41,570 completed new builds are 44% under target.
Local authorities thwart developers
Cash-strapped local authorities across Britain are hindering housebuilding by hitting developers with immediate council tax bills on new properties, the Home Builders Federation (HBF) has warned. Under current powers, councils can levy the tax as soon as a property is deemed structurally complete, leaving developers facing hefty bills on homes that still lack connected utilities or basic furnishings. HBF Chief Executive Neil Jefferson stated that this inconsistent and unfair enforcement adds severe financial strain at a time when firms already face soaring policy costs.
While some local authorities offer temporary discounts while housebuilders secure buyers, government data obtained by the HBF reveals that 45 per cent levy the full council tax rate immediately. This aggressive cash grab is penalising developers for holding stock, draining vital liquidity, and forcing firms to abort new housing schemes. Ultimately, the practice disincentivises development and creates a severe operational bottleneck that directly undermines efforts to expand the UK's housing supply.
Andrew Boast FMAAT
CEO of SAM Conveyancing
The data heading into the summer months confirms that the UK housing market is currently being shaped not by a lack of buyer desire, but by the strict boundaries of mortgage affordability. While headline lending rates have shown marginal stability under the Bank of England's 3.75% base rate, the underlying cost of borrowing remains historically high. Combined with a cooling labour market that prompts banks to tighten income stress tests, moving home in mid-2026 demands absolute financial precision.
The true challenge for today’s buyers and investors lies in navigating product architecture designed to mask high borrowing costs. As specialist lenders increasingly lean into fee–rate substitution—keeping monthly interest payments palatable by stacking heavy, upfront arrangement fees onto the loan—borrowers face a quiet threat to their long-term equity. Rolling these multi-thousand-pound fees into a 25- or 30-year mortgage balance strips away liquid cash, compounds interest over decades, and risks tipping tight applications into higher, more expensive loan-to-value (LTV) bands.
Ultimately, navigating this market successfully requires looking past top-line asking prices and focusing entirely on total capital friction. Securing a transition in this climate hinges on early financial preparation: stress-testing your own budget against potential mid-summer rate adjustments, evaluating the lifetime impact of product fees, and ensuring your financing is robust enough to withstand conservative surveyor valuations.
Frequently Asked Questions About the Housing Market Report
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With more than two decades’ experience in the conveyancing sector and over 50,000 successful client moves under his belt, Andrew shares insider tips and advice to empower you as a buyer, giving you the tools to make the best decisions for your circumstances and ease the chaos.
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