Houses in Lewes. Mortgage interest rates have broadly risen across the market in recent months. Photograph: Graham Prentice/Alamy View image in fullscreen Houses in Lewes. Mortgage interest rates have broadly risen across the market in recent months. Photograph: Graham Prentice/Alamy UK house prices fall for first time this year amid rising interest rates Nationwide finds typical price was Β£278,024 in May, as Savills says Iran war has βfundamentally changedβ outlook Business live β latest updates House prices fell in the UK for the first time this year in May, as rising interest rates triggered by the war in Iran hurt homebuyer demand. The price of the average UK home dropped 0.6% in May compared with the month before, according to the lender Nationwide. The typical house price was 1.7% higher than the same point last year, at Β£278,024. However, that marked a slowdown from an annual growth rate of 3% in April. βIt feels unfairβ: the Britons struggling to get a mortgage since Iran war began Read more Robert Gardner, the chief economist at Nationwide, said a βloss of momentum was to be expectedβ given uncertainty caused by conflict in the Middle East and the subsequent rise in energy prices and market interest rates . Mortgage rates have broadly risen across the market in recent months. The average two-year fixed rate was 5.68% at the end of May, while the average five-year fix was 5.63%, according to the financial data provider Moneyfacts. Tom Bill, a researcher at the estate agent Knight Frank, said Nationwideβs figures showed the housing market was slowing down βat precisely the time of year when you would expect momentum to be buildingβ. βThere wonβt be a cliff-edge moment, but the impact of higher borrowing costs will erode spending power and squeeze house prices this year as mortgage rates agreed before the Middle East conflict gradually disappear,β he said. The estate agent Savills has forecast that house prices will fall this year owing to rising mortgage rates. It said the impact of war in the Middle East had βfundamentally changedβ its outlook for the UK property market, predicting that average house prices will fall 2% this year, compared with its previous expectation of a 2% rise. But Gardner added that, while market interest rates had risen in recent months, βthe impact on affordability has so far been modest.β βSwap rates, which underpin fixedβrate mortgage pricing, remain well below the highs reached in 2023 and are broadly in line with levels prevailing in 2024, implying only a partial reversal of earlier gains,β he said. βThis provides some confidence that, if the latest shock passes relatively quickly, and energy prices normalise in the quarters ahead, any near-term softening in the housing market will also prove short lived.β Martin Beck, the chief economist at WPI Strategy, said: βEven if mortgage rates edge lower, the market remains vulnerable. βAffordability is still stretched, mortgage repayments absorb a historically large s