Annual UK house price growth accelerated in May, according to provisional Office for National Statistics (ONS) figures.
Property values rose by 3.9% on average in the 12 months to May, reaching £269,000 typically.
The annual growth rate increased from 3.6% in April.
The figures were released as a separate ONS report showed that Consumer Prices Index (CPI) inflation rose to 3.6% in June, up from 3.4% in May and the highest since January 2024.
The increase was unexpected, with many economists forecasting inflation to remain unchanged at 3.4%.
David Hollingworth, associate director at L&C Mortgages, said: “General anticipation had been that the rate of inflation would remain steady in June, so the increase to 3.6% is an unwelcome surprise.
“That will raise the question of whether it’s enough of a surprise to force the Bank (of England) to consider a delay to any further cuts in base rate.
“The recent tone has been consistent in its suggestion that interest rates should continue to fall but it’s been harder to be sure when those cuts may come, when data doesn’t follow the expected path.
“The Bank’s focus is on reducing the rate of inflation to its target of 2% but it may see enough reason to look through today’s figures to reduce rates in the August meeting.”
Mr Hollingworth continued: “Mortgage rates have been reflecting the market’s confidence in more cuts to come, as lenders have been quick to take advantage and trim back fixed rates.
“Lenders have been locked in an attritional rate battle that has seen frequent, albeit small, reductions made to fixed rate mortgage pricing.
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“Today’s news could take a bit of momentum out of those reductions but may not be enough to make a major reversal in those mortgage rate improvements.
“However, with recent changes in regulatory approach, lenders will have more flexibility when offering higher multiple mortgages and that is already feeding through into lender criteria.
“That and the promise of further rate cuts should still give mortgage borrowers room for optimism but today’s unexpected data is a reminder of just how hard it is to second-guess where rates may head.”
Average house prices increased to £290,000 (3.4% annual growth) in England, £210,000 (5.1%) in Wales, and £192,000 (6.4%) in Scotland, in the 12 months to May, according to the ONS figures.
The average house price for Northern Ireland was £185,000 between January and March, up by 9.5% annually.
Andrew Montlake, chief executive at mortgage brokers Coreco said: “During the first half of 2025, the property market was definitely skewed by the stamp duty changes, with a lot of activity brought forward to secure the savings on offer. Now, things are now getting back on track.
“Even though inflation ticked up slightly this morning, making the Bank of England’s tightrope walk between curbing inflation and promoting growth that little bit harder, it’s still likely that we will see at least one rate cut this year, if not two.
“The economy is stalling and desperately needs an injection of life, which will boost sentiment in bricks and mortar and see increased buyer activity. The second half of the year could be busy if the Bank of England delivers a rate cut in August.”
Jonathan Handford, managing director at Fine & Country, said: “The volatility that we saw in the spring – largely down to changes in stamp duty – is fading, and buyer sentiment is clearly recovering.”
Iain McKenzie, chief executive of the Guild of Property Professionals, said: “The increase in the average UK house price over the last year underscores a return to sustainable, confidence-driven growth.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Rate reductions have been playing their part in encouraging buyers and sellers to take the plunge and the markets still expect a further cut in (the Bank of England base rate) next month, even though inflation ticked up in June.
“Lenders have plenty of liquidity and are keen to lend, with mortgage rates fairly steady on the whole, while some lenders continue to reduce rates.”
Richard Donnell, executive director of research at Zoopla, said: “Lower, single digit house price inflation is positive for the market as there is just enough price growth to encourage sellers to list their homes and buyers to make offers on property without the fear that prices may fall or suddenly surge higher.
“We expect price inflation to remain low as there are the most homes for sale in seven years, averaging 37 per estate agent.”
On Tuesday, Chancellor Rachel Reeves told City bosses that Britain cannot meet its growth ambitions without a “fighting fit and thriving” finance sector, as she delivered her Mansion House speech.
The Treasury announced a package of reforms on Tuesday aimed at attracting more investment to the UK, to help grow the economy. It is also hoped that first-time buyers will be among those helped by the cutting of red tape, as part of the drive for economic growth.
Jason Tebb, president of OnTheMarket, said: “With mortgage lending rules being relaxed to assist buyers with affordability and boost first-time buyer numbers, there is recognition that it is a struggle to get on the housing ladder but only time will tell if these measures are enough to make a real difference.”
The average private rent in the UK was £1,344 per month in June. This is £84 (6.7%) higher than 12 months earlier, according to the ONS figures.
Annual growth in rental prices cooled from 7.0% in the 12 months to May.
The average rent in England was £1,399 in June, up by 6.7% (£88) from a year earlier.
In Wales, the average rent was £804 in June, marking a 8.2% (£61) annual increase.
In Scotland, the average rent in June was £999, up by 4.4% (£41) annually.
The average rent in Northern Ireland was £852 in April, the latest month for which the figures are available, up by 7.6% (£60) from a year earlier.
Nathan Emerson, chief executive of property professionals’ body Propertymark, said: “Investors in the private rental market have been deterred from investing in this crucial housing market because of tax and regulatory changes over the last 10 years.”
