![\"Housing](\"https:\/\/www.europesays.com\/uk\/wp-content\/uploads\/2025\/06\/UK-Housing-Prices-Rise-After-Months-Of-Pandemic-Related-Decline-1264522157.webp\")
\t\tLondon house prices have shrunk this year\t<\/p>\n\t\t\tFriday 05 June 2026 11:22 am
\n\t\t\t\t\t\u00a0|\u00a0\u00a0Updated:\u00a0<\/p>\n
\t\t\tFriday 05 June 2026 11:23 am\n\t<\/p>\n
\t\tLondon house prices have shrunk this year\t<\/p>\n
Fresh insight into the UK\u2019s lacklustre housing market revealed price declines for London and the South East on Friday, while the overall national rate of increase halved for May<\/p>\n
The closely-watched Halifax House Price Index was released with mortgage holders and would-be home buyers eyeing interest rate rises from the Bank of England (BOE).\u00a0<\/p>\n
The turn-around from previous expectations of further cuts from the BOE came amid rising inflation, stoked by higher energy prices following Israel and the US\u2019s war on Iran.\u00a0<\/p>\n
Amanda Bryden, Head of Mortgages, at Halifax, said: \u201cProperty price trends continue to reflect the uncertainty linked to developments in the Middle East.\u00a0<\/p>\n
\u201cDespite recent cuts to mortgage rates<\/a>, 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.\u201d<\/p>\n The influential index showed that the average home in the capital cost \u00a3534,375 in the month, down 1.5 per cent year-on-year. In the South East region, it was \u00a3382,704, down 2.1 per cent.\u00a0<\/p>\n Nationally, the average price rose by 0.5 per cent, to \u00a3298,806. In May last year, it rose 1 per cent.\u00a0<\/p>\n And City experts have warned that a BOE rate rise cannot be ruled out for the summer.\u00a0<\/p>\n Borrowing costs<\/strong><\/p>\n The current base cost of borrowing is 3.75 per cent. The rate of consumer price<\/a> inflation is 2.8 per cent, above the BOE\u2019s official 2 per cent target and is widely expected to rise further as the energy shock ripples into the data.\u00a0<\/p>\n The longer the Middle East conflict constrains global energy supplies, the bigger the upward effect on inflation will be. Off the southern shores of Iran, the Strait of Hormuz remains, in effect, closed. The\u00a0\u00a0route is usually used by around a fifth of the world\u2019s daily flow of seaborne oil and liquified natural gas.\u00a0<\/p>\n Rate-setting policy makers will next meet at the BOE on 18 June. The Monetary Policy Committee is expected to keep rates on hold then. But according to analysis from City bank ING, there could be upward action a month later.\u00a0<\/p>\n \u201cA hike\u00a0in July is possible if energy flows through the Strait of Hormuz don\u2019t materially \u2013 and durably \u2013 improve over the next 10 weeks\u201d, said James Smith, developed markets economist.\u00a0<\/p>\n Any such move would increase the cost of mortgages and home loans which track the bank rate. The house market is highly sensitive not just to the decision made at the BOE, but also the perceived directions of monetary policy.\u00a0<\/p>\n \t\t\t\t\tRead more<\/p>\n