As we moved through May, the UK property market faced a more challenging backdrop than many had anticipated at the start of the year. Rising geopolitical tensions, renewed inflation concerns and uncertainty around future interest rate movements combined to create a more cautious environment for buyers and investors alike.
While activity levels remained relatively resilient, the market began to show signs of slowing momentum, particularly in higher-value areas of Southern England. At the same time, regional markets across the Midlands, North of England, Scotland and Wales continued to demonstrate stronger underlying demand and affordability.
House Prices Pause After a Strong Start to 2026
Following encouraging growth earlier in the year, May saw a cooling in house price performance.
According to Nationwide, average UK house prices fell by 0.6% during May, the largest monthly decline since mid-2025. Annual house price growth also slowed from 3.0% in April to 1.7% in May, highlighting a market becoming more sensitive to economic uncertainty.
However, the picture remains mixed depending on which index is reviewed. Rightmove reported that asking prices rose by 1.2% during May to a record average of £378,304, suggesting sellers remain confident despite wider economic concerns. The portal also reported that agreed sales were only 4% below last year’s levels, indicating that buyer demand has not disappeared.
Zoopla’s latest data showed annual house price growth of 1.5%, with the average UK property now valued at approximately £271,900.
Mortgage Market Remains Active
One of the more positive stories during May came from mortgage lending activity.
Bank of England figures released during the month showed mortgage approvals rising to 63,531 in March, the highest level since November 2025 and above market expectations. This suggested that buyers were still progressing purchases despite economic uncertainty.
Encouragingly for borrowers, some lenders began reducing fixed-rate mortgage products during May after swap rates eased from their recent highs. Rightmove’s mortgage tracker showed the average two-year fixed rate falling to 5.18%, down from 5.42% the previous month.
While borrowing costs remain significantly higher than many investors became accustomed to during the previous decade, affordability is gradually improving and lenders continue to compete for business.
Regional Markets Continue to Outperform
As we have highlighted throughout the year, the UK’s housing market remains highly regionalised.
Lower-priced markets across Northern England, Scotland and Wales continue to benefit from stronger affordability and attractive rental yields. Recent house price data and market forecasts suggest these regions are likely to outperform London and much of the South East throughout 2026.
This trend remains particularly relevant for investors seeking income-focused opportunities, where rental demand remains strong and entry prices continue to offer attractive value compared with southern markets.
Financial Markets and Interest Rates
May was heavily influenced by global events and their impact on inflation expectations.
Markets entered the month expecting further Bank of England rate reductions during 2026. However, renewed geopolitical tensions and concerns around energy prices caused bond yields and mortgage pricing to become more volatile. This led some economists to revise expectations for the pace of future rate cuts.
Despite these headwinds, inflation continues to trend below the peaks experienced during the cost-of-living crisis, and most forecasters still expect modest house price growth over the course of 2026 rather than a significant correction. Current forecasts from major lenders and property analysts generally point towards annual growth of between 1% and 3%, although regional performance is expected to vary considerably.
Investor Outlook
The changing market conditions seen during May reinforce an important principle for investors: successful property investing is increasingly about diversification rather than relying on a single strategy.
While traditional buy-to-let property continues to play an important role within many portfolios, higher borrowing costs and evolving rental regulations have encouraged investors to explore alternative opportunities that offer different risk and income characteristics.
One area that continues to attract significant interest is Specialist Supported Housing (SSH). Unlike conventional residential property, these assets are typically underpinned by long-term housing demand and are less dependent on short-term market fluctuations. As local authorities and housing providers continue to face supply shortages across the UK, the sector remains supported by strong structural fundamentals.
At the same time, investors are becoming increasingly focused on opportunities that provide exposure to the property market without the operational responsibilities often associated with direct ownership. This trend is driving interest in innovative investment structures that allow investors to participate in property-backed opportunities while reducing reliance on mortgage finance and day-to-day management.
As Portico continues to evolve, we remain focused on identifying investment opportunities that are supported by long-term demographic, economic and housing market trends. Whether through traditional residential property, specialist housing sectors or new investment models currently in development, our objective remains the same: helping investors build resilient portfolios designed for long-term growth and income.
With economic uncertainty expected to remain a feature of the market throughout 2026, diversification, asset quality and careful market selection are likely to become increasingly important factors in investor decision-making.