LONDON, June 1 (Reuters) - British house prices fell by 0.6% in May, their first monthly drop since December and growth slowed in annual terms, as economic uncertainty stemming from the war in Iran hurt demand, figures from mortgage lender Nationwide showed on Monday.
The monthly decline was the biggest since June 2025, Nationwide said, and a sharper drop than the 0.2% fall forecast in a Reuters poll.
House prices rose by 1.7% year-on-year in May after rising 3% in April, coming in below economists'
expectations for a 2.2% increase.
"Given 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," Nationwide chief economist Robert Gardner said.
"Consumer confidence has weakened noticeably since the start of the conflict."
Average mortgage rates have climbed since the start of the Iran war, which has pushed up borrowing costs on financial markets' expectations that the Bank of England will raise interest rates later this year, rather than cut them.
Figures from Rightmove on Friday showed the average rate for a two-year fixed-rate mortgage was 5.13% and 5.15% for a five-year fixed rate - both up around half a percentage point compared with a year earlier.
The Royal Institution of Chartered Surveyors said its members reported the most widespread falls in prices since November 2023 in April and described sales volumes and sentiment as subdued, especially in pricier London and southern England.
Halifax, another major lender, reported a 0.1% drop in house prices in April and said that they were just 0.4% higher than a year earlier.
(Reporting by Suban Abdulla; editing by Sarah Young)
