UK house prices fall in March amid uncertain impact of Middle East conflict

Average price dips back below £300,000 after higher energy costs have knock-on effect on mortgage rates

UK house prices fell in March, as the housing market lost momentum amid uncertainty over the conflict in the Middle East and the impact on the economy and interest rates.

Figures from Halifax, which is part of Lloyds – Britain’s biggest mortgage lender – showed property prices dipped by 0.5% in March compared with a month earlier. As a result, the average price of a home slipped back below £300,000, to £299,677, after first crossing the milestone in January.

The pace of annual property price growth also eased to 0.8%, down from 1.2% the previous month, suggesting a slowdown in the housing market at the start of the traditional spring selling season.

Halifax said uncertainty over the conflict in the Middle East had dampened the “initial momentum in the market seen at the start of the year”. Concerns about higher energy prices have pushed up inflation expectations, which has in turn led to a rise in mortgage rates.

Expectations that the Bank of England could raise interest rates several times this year has driven up the cost of fixed-rate mortgages. However, City traders cut their forecasts for rate rises on Wednesday morning after the US and Iran agreed to a two-week conditional ceasefire on Tuesday night, with only one quarter-point rise now fully priced in for this year.

The choice of mortgage deals shrank in recent weeks, with hundreds of mortgage products pulled from the market. The average two-year fixed residential mortgage rate also moved upwards to 5.84% by the end of March, the highest since July 2024.

“The effect on house prices will largely depend on how long‑lasting these pressures prove to be and the wider implications for the economy and unemployment,” said Amanda Bryden, the head of mortgages at Halifax.

“Mortgage rates are a key factor for buyers, particularly those getting on the ladder for the first time, who are already balancing the challenge of saving a deposit, with the cost of borrowing.”

Many prospective house buyers are expected to keep a close eye on mortgage rates before making a decision on whether to go ahead with a purchase. The recent increase in mortgage rates has, however, been more modest than the sharp rises seen after Liz Truss’s mini-budget in 2022.

Bryden added that many households will be on fixed mortgage deals that will protect them from the latest rate rises. The Bank of England left rates on hold in March but signalled it could be forced to increase borrowing costs in the coming months as the Iran conflict has threatened to drive UK inflation above 3%.

House prices continue to vary by region across the UK. Northern Ireland still leads UK annual house price growth, with average prices up 8.7% over the past year to £224,809.

Strong growth was also recorded in Scotland, where the average price of a home rose 4.4% annually to £222,716. The typical value of a home in Wales is now £230,909 after more modest increases of 1.6% annually.

Stronger price growth in England remains concentrated in northern regions. Prices continued to ease in the south of England, while prices fell 1.9% year on year in the south-east and average values in London slid by 1.2%.

UK housebuilding activity continued to decline in March, the data provider S&P Global reported on Wednesday. Its UK construction purchasing managers’ index showed a fall in orders across the sector, and a rapid acceleration in input cost inflation as the war in the Middle East had pushed up fuel, transportation and raw material prices.

“Survey respondents commented on fragile consumer confidence and delayed investment decisions in response to the outbreak of war in the Middle East,” said Tim Moore, the economics director at S&P Global Market Intelligence.