UK house prices unexpectedly declined in March, as growing economic uncertainty linked to tensions in the Middle East weighed on buyer sentiment, according to new data from mortgage
lender Halifax.
Prices fell by 0.5% month-on-month, reversing February’s 0.3% increase and defying expectations from economists, who had forecast a modest 0.1% rise. The drop highlights the fragility of the housing market as external geopolitical risks begin to filter into domestic financial conditions.
On an annual basis, house prices were up by just 0.8% compared with March last year—well below the 1.5% growth anticipated by analysts. The weaker-than-expected figures suggest momentum in the property market has slowed after a relatively stronger start to the year.
Halifax noted that uncertainty surrounding the ongoing conflict involving Iran has dampened demand, as concerns over rising energy costs feed into broader inflation expectations. This, in turn, has pushed mortgage rates higher, making borrowing more expensive for prospective buyers.
Amanda Bryden, head of mortgages at Halifax, said the housing market’s recent slowdown reflects a more cautious outlook among buyers. Expectations that interest rates could remain elevated for longer have reduced confidence, limiting activity across the sector.
Interestingly, the data contrasts with figures from rival lender Nationwide, which reported a notable increase in house prices over the same period, underscoring the mixed signals currently emerging from the market.
Additional context: UK house prices in recent months
The March decline follows a period of uneven performance in the UK housing market. Earlier in the year, prices showed modest growth as buyers returned after a subdued 2024, encouraged by hopes that interest rates would begin to fall in 2025.
However, in recent months, several factors have complicated that outlook:
- Mortgage rates have remained higher than expected, with lenders adjusting pricing in response to persistent inflation concerns.
- Cost-of-living pressures continue to limit affordability, particularly for first-time buyers.
- Geopolitical tensions, including the situation in the Middle East, have added volatility to financial markets, indirectly impacting housing demand.
Despite these headwinds, the market has not seen a sharp correction. Instead, it has entered a phase of slow, uneven growth, with small monthly fluctuations rather than large swings.
Looking ahead, analysts expect house prices to remain relatively flat or experience modest changes in the coming months, largely depending on inflation trends and signals from the Bank of England regarding future interest rate cuts.
