I don't think the terms "hobbit" or "halfling" were applied. However, one slightly more literal version of Celtic folklore (or you might call it metafolklore) holds that there was a race of small people in the British Isles whom the larger Celts displaced, and they took to the hills and forests to live in secret.

Plus there are the more humanish varieties of elves, gnomes, goblins, etc.. It's just that "hobbit" is the best word.