UK house prices fall as Iran war uncertainty dampens demand

UK House Prices Decline Amid Iran Conflict Uncertainty

Recent data from Halifax indicates a 0.5% drop in the average UK property price during March, attributed to heightened mortgage rates stemming from the fallout of the Iran conflict. This decline marks a shift from the 0.3% increase recorded in February, prior to the escalation of the war, which had already raised energy costs and sparked concerns about inflation.

As of March, the national average house price stands at £299,677, with annual growth slowing further. The market’s recent downturn suggests that inflation expectations remain elevated, potentially delaying interest rate reductions in the coming months. Mortgage rates have surged, leading to the disappearance of numerous low-cost deals in recent weeks.

Halifax noted that the current rise in mortgage rates has not reached the same level as seen four years ago. Amanda Bryden, the firm’s head of mortgages, highlighted that the housing market’s slowdown is primarily driven by the ongoing uncertainty surrounding the Middle East conflict. She added that energy price concerns have contributed to this trend, influencing buyer confidence and market momentum.

Analysts suggest that the duration of weaker demand will hinge on the persistence of these factors and their broader economic effects. The recent withdrawal of mortgage deals has been the most significant since the 2022 mini-Budget under former Prime Minister Liz Truss, underscoring the market’s sensitivity to financial shifts.

“The recent slowdown in the housing market reflects the wide uncertainty regarding the conflict in the Middle East,” Bryden stated. “Concerns about higher energy prices have pushed up inflation expectations, which in turn led to a rise in mortgage rates, reducing confidence that interest rates will be cut this year and dampening the initial momentum in the market seen at the start of the year.”