The fall comes after prices dropped by the same amount in April. Over the year to May 2026 they only increased by 0.5%.
This slowdown is being attributed to the uncertainty caused by developments in the Middle East.
Amanda Bryden, head of mortgages, Halifax, said: “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.
“Even so, overall activity has held up well, reflecting the underlying resilience of the UK housing market. Latest industry figures show transaction levels remain relatively stable, suggesting buyers and sellers are still moving.”
However, she noted, among first-time buyers, annual growth was at 0.3%. “While getting onto the property ladder remains a big challenge,” she said, “there has been increasing support from lenders, including more flexible affordability checks and a growing range of low deposit options.”
Where have house prices grown the most?
Northern Ireland continued to be the nation with the highest annual growth, rising 7.8% over the past year to hit £227,177 – the highest in the last six months, according to Halifax.
Scotland also recorded strong annual growth of 3.8%, with an average price of £222,650. But in Wales property price growth was much slower, at 0.1% annually taking the typical home value to £230,355.
In England it was the northern regions 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 home now costing £248,304.
In the south prices have tumbled. Halifax reported the South East led declines, with prices falling by 2.1% in the year to May 2026. A typical property here is now £382,704. In London average values dropped by 1.5% to £534,375.
What’s the outlook for property prices for the rest of 2026?
Bryden thought the picture should remain ‘stable’ for the next few months. “Looking ahead,” she said, “borrowing costs and consumer confidence are likely to continue shaping activity in the coming months, with house prices expected to be 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.”
Mortgage experts, meanwhile, say would-be buyers, sellers and those remortgaging should prepare for more uncertainty and keep an eye on developments.
Karen Noye, mortgage expert at Quilter, said: “For now, the housing market is likely to remain on a subdued footing. While mortgage rates have edged down from their recent highs as swap rates have stabilised, the improvement has been gradual rather than decisive and borrowing costs remain elevated by recent standards.
She added: “For those looking to buy or remortgage, the environment remains finely balanced. Rates are no longer moving sharply higher, but nor is there a clear downward trajectory.
“In this kind of market, staying close to developments and reviewing options early, ideally with professional advice, will leave borrowers better placed in the long run.”