UK House Prices Decline Amidst Iran Conflict Uncertainty, Mortgage Rates Rise

Average UK house prices experienced a 0.5% decrease in March, a direct consequence of elevated mortgage rates spurred by the wider implications of the conflict in Iran. This marks a notable shift from the 0.3% increase observed in February, as the average property value now stands at £299,677.

Impact on Mortgage Market

The intensification of the conflict, which has driven up energy costs and stoked inflation fears, has significantly impacted the mortgage market. Hundreds of the most competitive mortgage deals have been withdrawn in recent weeks, with the average rate on a two-year fixed deal climbing from 4.83% at the start of March to 5.90% currently.

Amanda Bryden, Head of Mortgages at Halifax, commented on the situation, stating, ". . .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."

Market Outlook

Despite a recent fall in Brent crude prices following discussions of a conditional ceasefire, oil remains significantly more expensive than before the conflict began. This sustained pressure on energy costs continues to influence mortgage rates, with experts suggesting that any substantial fall in rates is unlikely in the immediate future.

Nicky Stevenson, Managing Director of Fine and Country estate agents, predicts that house prices will likely remain 'choppy' month-on-month. However, she asserts that the 'bigger picture is still one of modest stability,' despite the current volatility. The longer a ceasefire holds, the more potential there is for the mortgage market to stabilise and rates to gradually edge lower, though sharp falls are not anticipated.