Halifax has warned that the US-Israel conflict with Iran could slow the decline in mortgage rates this year, as UK house price growth eased sharply in February. The lender, part of Lloyds Banking Group, said the Middle East turmoil risks stoking inflation and reducing the pace of interest rate cuts that influence borrowing costs for homebuyers.
House prices rose by just 0.3% month on month in February to an average of £301,151, down from a 0.8% increase in January, which had pushed values above £300,000 for the first time. Annual growth stood at 1.3%, the strongest in four months, but first-time buyers continue to face affordability challenges.
“Geopolitical uncertainties seem set to influence the outlook for inflation and the wider economy,” said Amanda Bryden, head of mortgages at Halifax. “Markets are now anticipating a more gradual path for interest rate reductions. If realised, the speed at which borrowing costs ease may be tempered.”
Analysts have lowered expectations for a Bank of England rate cut later this month, as swap rates – which underpin fixed-mortgage pricing – have risen. Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “The conflict in the Middle East has lifted energy prices and shrunk central bank rate cut expectations. A number of lenders have already increased their mortgage rates.”
HSBC, Nationwide and Coventry Building Society this week became the first major lenders to raise fixed-rate deals, with brokers predicting further increases. Jeremy Leaf, a north London estate agent, said: “Some buyers and sellers have been pressing the pause button since the war began. Activity had picked up steadily, but that improvement may now slowly unwind.”
Regionally, Northern Ireland saw the strongest annual growth at 6.3%, followed by Scotland (4.7%) and Wales (2.4%). In contrast, prices fell 2.2% year on year in the South East and 1% in London, where the average home now costs £538,200.
