Annual UK house price growth slowed to 3.5% in May, down from 3.9% in April, as affordability pressures continue to weigh on buyer demand according to the latest Nationwide House Price Index.

The building society reported that the average UK house price now stands at £273,427, representing a monthly increase of 0.5% after taking account of seasonal effects. Despite the annual slowdown, prices remain above levels seen a year ago, supported by resilient labour market conditions and rising earnings.

Housing market activity has remained relatively stable following the end of the temporary stamp duty threshold changes earlier this year, although affordability remains stretched by historic standards.

While mortgage rates have eased from the highs seen in 2023 and 2024, borrowing costs continue to limit the purchasing power of many buyers, particularly in higher-value regions of southern England.

Robert Gardner, Chief Economist at Nationwide, said: “While market interest rates have risen in recent months, the impact on affordability has so far been modest. Indeed, swap rates, which underpin fixed‑rate 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.

“This 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.”

For investors and landlords, the slower pace of house price growth may help improve acquisition opportunities, particularly in regions where rental demand remains strong and yields continue to outperform capital appreciation.