Housing market to soften amid Iran war fallout, Nationwide says

Nationwide forecasts a potential easing in the UK’s housing market, citing increased mortgage and energy expenses linked to the Iran conflict. The bank’s latest data revealed a 0.9% rise in house prices for March, indicating the market ‘had regained momentum’ during the month.

The Middle East conflict has triggered a notable energy price surge, posing a ‘significant shock to the global economy, clouding the outlook’ according to Nationwide. This shift has influenced financial markets, leading to higher mortgage rates and the withdrawal of numerous products by lenders in recent weeks.

According to Nationwide’s figures, the average property price in March reached £277,186. Annual price growth accelerated to 2.2%, climbing from 1% in February. However, the building society warned that a prolonged Middle East conflict could negatively impact the market.

Prior to the war, the Bank of England was anticipated to lower rates twice this year. The energy price surge, however, has shifted market expectations, prompting forecasts of rate hikes to combat inflation. Moneyfacts reported that the average two-year fixed rate reached 5.75% last week, up from 4.83% at the start of March. The five-year fixed rate climbed from 4.95% to 5.69% over the same period, marking its highest level since July 2024.

Robert Gardner, Nationwide’s chief economist, said if higher rates are sustained, ‘this could reverse some of the improvement in housing affordability that has taken place in recent years.’ ‘With consumer sentiment also likely to be dented by the uncertain outlook and the prospect of rising energy costs, housing market activity is likely to soften,’ he said.