UK house prices drop 3.4% in May

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UK house prices have dropped again, and rising mortgage rates could put more pressure on the market in the months to come.

The average price of houses sold in May was 3.4% lower than a year ago, down from a fall of 2.7% in April.

In May alone, prices slipped by 0.1% on a seasonally adjusted basis, partly reversing April's 0.4% rise.

In May, the average price was 260,736, reports Nationwide, who predict activity is likely to remain subdued in the near term.

The broader picture is that average house prices are about 4% lower than their peak last summer, just before the mini-budget rocked markets and driven up mortgage rates.

Following tentative signs of improvement in April, annual house price growth softened again in May, falling back to - 3.4% from - 2.7% in April. This largely reflects base effects, with prices generally flat over the month after considering seasonal effects. The average price of goods remains 4% below their August 2022 peak. Bank of England data showed improvement in housing market activity, although the number of mortgages approved for house purchase in March was still around 20% below pre-pandemic levels.

This morning, the Bank of England will release new mortgage approvals and consumer credit data, providing a peek into the state of the property market.

We also get healthchecks on factory sites in the eurozone, in the UK and in the US. Last week's flash readings shown that manufacturing in France and Germany was weak, so today's readings could reinforce recession worries.

At lunchtime, a new survey of job creation across the country will be released, which could indicate how the main US jobs report, Friday s Non-Farm Payroll, will happen.

Investors are also looking forward to the eurozone inflation report in May, which could give hints as to whether the European Central Bank may stop raising interest rates soon.

The eurozone's inflation outlook is expected to drop, from 7% to 63%, following declines in Germany, France, Italy and Spain earlier this week. But core inflation could be stickingier, causing problems for central bankers.