UK house prices experienced a period of uncertainty in March as the housing market showed signs of slowing. This slowdown has been influenced by the ongoing conflict in the Middle East, rising energy costs, inflation expectations, and concerns about potential Bank of England interest rate rises. These factors combined to make buyers more cautious, particularly as the traditional spring selling season got underway.
According to Halifax, part of the Lloyds Banking Group, UK property prices dipped by 0.5% in March compared with February. This fall meant that the average price of a home slipped below £300,000, landing at £299,677 after briefly surpassing this milestone in January. On an annual basis, price growth also moderated, falling from 1.2% to 0.8%, highlighting the slowing momentum in the market. Halifax noted that geopolitical uncertainty, especially the Middle East conflict, had curtailed the early-year market optimism.
Amanda Bryden, Halifax’s Head of Mortgages, commented that the impact on house prices would largely depend on the duration of these pressures and their wider effect on the economy, including employment levels. She added that mortgage rates remain a crucial factor for buyers, particularly first-time purchasers who are balancing the challenge of saving for a deposit with the cost of borrowing.
Mortgage availability has also tightened in recent weeks, with hundreds of products withdrawn from the market. The average two-year fixed residential mortgage rate rose to 5.84% by the end of March, marking the highest level since July 2024. Despite this, many households continue to benefit from existing fixed-rate deals, which provide some protection from recent rate increases.
While Halifax data suggested a slowdown, Nationwide reported a slightly different picture. Its house price index indicated that UK property prices rose by 0.9% month-on-month in March, putting the average cost of a home at £277,186, up from £273,176 in February. On a year-on-year basis, house prices grew by 2.2%, an acceleration from 1% growth in February, signalling that some segments of the market retained momentum despite broader uncertainty.
Regional trends varied significantly. Northern Ireland recorded the highest growth, with house prices rising 9.5% year-on-year to an average of £225,269 in the first quarter. The North West saw a 3.3% increase to £229,173, while London’s average house price rose by 1.7% annually to £538,181. These figures show that while some regions are thriving, others are more sensitive to economic pressures.
Robert Gardner, Chief Economist at Nationwide, highlighted that the surge in global energy prices following developments in the Middle East represents a significant economic shock. He cautioned that near-term UK economic growth is likely to be slower and inflation higher than previously expected, with the overall effect dependent on how long the pressures last and the policy response from both the government and the Bank of England.
Interest rate expectations have shifted sharply. Before the recent geopolitical developments, markets had anticipated two rate cuts over the next year. By the end of March, however, three potential rate increases were priced in, reflecting the uncertainty caused by rising energy costs. This change has contributed to higher long-term interest rates, which underpin the cost of fixed-rate mortgages and adds complexity for buyers planning their next move.
Karen Noye, a mortgage expert at Quilter, noted that the latest Nationwide figures reflect the early stages of mortgage repricing following the tensions in the Middle East. While house prices have shown some resilience so far, she warned that momentum is likely to soften in the months ahead as higher mortgage rates and economic uncertainty weigh on buyer confidence.
For prospective buyers, particularly those entering the market for the first time, mortgage rates remain a key consideration. Many will monitor the market closely before committing to a purchase, balancing the cost of borrowing with the need to save for a deposit. Despite the challenges, fixed-rate deals for existing homeowners continue to provide some reassurance against rising interest rates.
Looking ahead, the UK housing market faces a mixture of optimism and caution. While certain regions and sectors continue to show growth, the broader economic uncertainty caused by geopolitical events and inflationary pressures could temper activity in the coming months. Buyers and sellers may need to adopt a measured approach until there is greater clarity on interest rates, economic conditions, and the longer-term impact of global developments.
Ultimately, the market remains in a state of flux. Both first-time buyers and seasoned homeowners are advised to weigh their options carefully, taking into account regional trends, mortgage availability, and the potential economic consequences of ongoing international tensions. In such an environment, patience and careful planning are likely to be as important as financial readiness when navigating the UK housing market.
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