The latest Halifax House Price Index shows average UK property values have stayed above £300,000 for a second consecutive month, highlighting the resilience of the housing market. But early momentum could be threatened by geopolitical tensions.
The conflict in Iran and wider unrest across the Middle East is expected to have a major impact on the UK property market.
Karen Noye, mortgage expert at Quilter, commented: “The backdrop for buyers has become more complicated in just a few days. Hopes of a steadier rate environment have been disrupted by fresh instability following the war in Iran. While there will not be a sudden jump in mortgage rates lenders may pause planned reductions, with swap rates rising sharply as geopolitical tensions push up oil prices and revive inflation concerns. This shift makes it harder for households to judge when affordability will genuinely improve.
“Although buyer interest has improved on last year, sentiment remains fragile,” Noye added. “Global uncertainty could slow the momentum that had been emerging, particularly if markets continue to expect firmer inflation. That would keep mortgage pricing stickier than borrowers hoped, limiting any meaningful uplift in demand. Much now depends on how quickly rate expectations stabilise. If swap rates calm and lenders regain confidence, competition could return, but the outlook is highly sensitive to global events.”
Alice Haine, Personal Finance Analyst at Bestinvest by Evelyn Partners, agrees that the housing market has a fresh challenge.
She commented: “Conflict in the Middle East that has sent energy prices soaring, creating an inflationary headwind which may cloud the outlook for interest rates, just at a point when borrowing costs had eased into more palatable territory.
“The Bank of England had been expected to cut interest rates at its next Monetary Policy Meeting on March 19, supported by easing inflation, concerns over rising unemployment and sluggish economic growth – with the potential for further cuts later in the year. However, fears are now mounting that rate cuts may be delayed, or worse, that the Bank may even need to raise rates again to counter a fresh inflationary shock driven by surging energy prices.”
“While first-time buyers and those coming off short-term fixes must prepare themselves for slightly higher rates than they had hoped, the group likely to be most anxious about the outlook for mortgage rates are borrowers emerging from ultra-low fixed-rate arrangements secured five years ago before the BoE began hiking rates,” Haine added. “Many were already bracing for significant increases in their monthly repayments, but these could now be even higher than feared if mortgage rates continue to rise.”
Tom Bill, head of UK residential research at Knight Frank, points out that momentum in the housing market had been rebuilding after November’s Budget and the outlook for mortgages was brighter only a week ago.
He explained: “A prolonged conflict in the Middle East would dampen sentiment and delay rate cuts due to rising inflation, which would put downwards pressure on prices.
“That said, we have seen how quickly interest rate expectations can change this year, and the underlying weakness in the jobs market is one of several reasons that multiple cuts could come back onto the table in 2026, which would support demand. A lot hinges on the length of the conflict.”
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