UK house prices fall as Iran war uncertainty dampens demand

UK Housing Market Slows Amid Iran Conflict Uncertainty

In March, the UK’s average property price declined by 0.5%, reported Halifax, as rising mortgage rates fueled by the Iran conflict’s effects reduced market demand. The current average stands at £299,677, with annual price growth also decelerating, according to the UK’s largest mortgage lender.

This decline follows a 0.3% increase in February, prior to the conflict’s onset, which had previously driven up energy costs and raised concerns about inflation persistence. Over recent weeks, mortgage rates have surged, leading to the disappearance of numerous affordable mortgage options. The most significant weekly decline in available deals occurred last month, marking the largest drop since the 2022 mini-Budget under Prime Minister Liz Truss.

Market Reactions and Economic Outlook

Amanda Bryden, head of mortgages at Halifax, noted that the recent market slowdown is largely due to the uncertainty surrounding the Middle Eastern conflict. She added that rising energy costs have increased inflation forecasts, prompting higher mortgage rates and diminishing hopes for rate cuts this year, which has slowed the market’s early-year growth.

“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.”

Bryden highlighted that the extent of the demand slowdown will hinge on the persistence of these factors and their broader economic impact, including employment trends. The situation underscores the delicate balance between global geopolitical tensions and domestic economic stability.