UK house prices rose sharply in March but Iran war expected to cause slowdown | Housing market
House prices in England rose at the fastest pace in almost 18 months in March, according to Nationwide; however, rising mortgage rates during the Iran war will likely lead to a market slowdown.
The price of a typical UK home rose 0.9% month-on-month in March, the biggest increase since December 2024, the UK’s largest housebuilder said.
The increase, compared with the 0.3% rise recorded in February and above economists’ expectations for growth of 0.6%, means the average price of a house in the UK is now £277,186. Annual house price growth increased from 1% in February to 2.2% in March.
But Nationwide warned that the US-Israeli war against Iran was “clouding the outlook” and that financial markets expected the Bank of England’s monetary policy committee to raise its base rate three times from 3.75% over the next 12 months.
Before the outbreak of conflict in the Middle East, analysts were expecting two rate cuts this year.
“This change caused a sharp increase in long-term interest rates [swap rates] “This supports fixed-rate mortgage pricing,” said Nationwide chief economist Robert Gardner. “Housing market activity is likely to soften as consumer sentiment is weighed down by the uncertain outlook and the prospect of rising energy costs.”
Average mortgage rates have risen above 5% in recent weeks as lenders struck hundreds of deals in the biggest upheaval since the 2022 mini-budget.
The average two-year fixed-rate mortgage rate on Monday rose to 5.77%, up from 4.83% in early March and the highest since August 2024, according to Moneyfacts.
The five-year fixed-rate mortgage rose to 5.7 percent, the highest level since November 2023, from 4.95 percent at the beginning of the month.
Quilter mortgage expert Karen Noye said: “Expectations of lower borrowing costs and a gradual increase in affordability were supporting activity at the start of the year, but any real progress was quickly undone last month.
“Since the start of the conflict, mortgage rates have risen sharply and lenders are quickly withdrawing products or re-pricing fixed-rate deals. For potential home buyers and conveyancers this means a rapid deterioration in affordability.”
