UK house prices fall as Iran war uncertainty dampens demand

UK House Prices Dip Amid Middle East Conflict Concerns

In March, UK house prices experienced a 0.5% decline, as reported by Halifax, due to rising mortgage rates triggered by the ongoing Iran war. The average property price now stands at £299,677, with annual price growth also showing signs of deceleration, according to the UK’s largest mortgage lender. This reversal follows a 0.3% increase in February, before the conflict escalated energy costs and sparked worries about inflation.

Market Slowdown Tied to Geopolitical Uncertainty

The recent drop in prices reflects growing uncertainty surrounding the Middle East conflict, which has heightened fears of sustained inflation and delayed interest rate cuts. Over the past weeks, mortgage rates have surged, leading to the disappearance of hundreds of affordable deals. Last month marked the most significant single-day withdrawal of such deals since the 2022 mini-Budget under Liz Truss, which had caused a sharp market slump.

“The current housing market slowdown is driven by widespread concerns about the Middle East conflict,” explained Amanda Bryden, head of mortgages at Halifax. “Rising energy costs have inflated inflation expectations, pushing mortgage rates higher and dampening buyer confidence. This has shifted the focus away from potential rate cuts this year, reversing the early-year momentum.”

Uncertainty Over Economic Impact

Bryden noted that the extent of the demand decline will depend on how long the conflict’s effects linger and their broader economic consequences. Unemployment and other factors could further influence the market’s trajectory, though the rate hikes this time have not reached the intensity seen four years prior. The situation underscores the delicate balance between geopolitical risks and domestic economic stability.