UK house prices fall as Iran war uncertainty dampens demand

UK House Prices Fall Amid Iran War Uncertainty

Halifax reported a 0.5% decline in average UK house prices during March, signaling a slowdown in the real estate market. The current average property price stands at £299,677, with annual price growth also showing signs of deceleration, according to the UK’s leading mortgage lender.

February’s 0.3% increase in prices had been a rare upward trend before the Iran conflict escalated, prompting a surge in energy costs. This has raised concerns about inflationary pressures, potentially delaying any interest rate reductions for the remainder of the year. The ongoing war has introduced significant uncertainty, affecting buyer confidence and market dynamics.

Mortgage rates have risen sharply in recent weeks, leading to the disappearance of hundreds of low-cost deals. This marks the largest daily withdrawal of mortgage options since the 2022 mini-Budget under former Prime Minister Liz Truss. While the rate hikes are notable, Halifax noted that they have not reached the same level as those seen four years prior.

“The current housing market slowdown is largely driven by uncertainty surrounding the Middle East conflict,” explained Amanda Bryden, head of mortgages at Halifax. “Rising energy costs have heightened inflation expectations, which in turn have pushed mortgage rates higher. This has reduced the likelihood of interest rate cuts this year and tempered the market’s early-year momentum.”

Bryden added that the duration of weaker demand will depend on the persistence of these factors and their broader economic implications, including potential effects on employment and inflation trends.