UK House Prices Decline in March Amid Economic Uncertainty
UK house prices declined in March as the housing market lost momentum amid uncertainty surrounding the conflict in the Middle East and its potential effects on the economy and interest rates.
Data from Halifax, part of Lloyds Banking Group—the UK's largest mortgage lender—indicated that property prices fell by 0.5% in March compared to the previous month. Consequently, the average home price dropped below £300,000, reaching £299,677, reversing gains seen in January.
The annual growth rate of property prices also slowed to 0.8%, down from 1.2% in February, signaling a cooling in the market at the start of the traditional spring selling season.
Impact of Middle East Conflict and Inflation on Mortgage Rates
Halifax attributed the slowdown to uncertainty over the Middle East conflict, which has dampened the initial market momentum observed earlier in the year. Rising concerns about inflation have increased inflation expectations, contributing to higher mortgage rates.
Anticipation that the Bank of England may implement several interest rate hikes this year has elevated the cost of fixed-rate mortgages. However, City traders revised down their forecasts for rate increases on Wednesday morning after recent economic data, with only one quarter-point rise now fully priced in for 2024.
The availability of mortgage deals for homeowners has diminished, with hundreds of mortgage products withdrawn from the market. By the end of March, the average two-year fixed residential mortgage rate rose to 5.84%, marking the highest level since July 2024.
Expert Commentary on Market Conditions
“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, 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 buyers are expected to monitor mortgage rates closely before deciding to proceed with a purchase. Despite recent increases, mortgage rate rises have been less severe than those experienced following the 2022 peak.
Bryden also noted that numerous households remain on fixed mortgage deals, which shield them from the latest rate increases. The Bank of England raised rates in March but indicated that further increases may be necessary in the coming months as the Iran conflict threatens to push UK inflation above 3%.
Regional Variations in House Price Growth
House price trends continue to vary across the UK. Northern Ireland leads annual house price growth, with average prices rising 8.7% over the past year to £224,809.
Scotland also recorded strong growth, with average home prices increasing 4.4% annually to £222,716. In Wales, the typical home value reached £230,909 following more modest annual growth of 1.6%.
In England, stronger price growth remains concentrated in northern regions. Prices continued to decline in southern England, with a 1.9% year-on-year decrease in the south-east and a 1.2% drop in average values in London.
