The UK housing market is facing a period of uncertainty as global events impact both buyer confidence and affordability. In March, average house prices across the country fell by 0.5%, marking a reversal from the 0.3% increase recorded in February. This shift comes in the wake of the conflict involving Iran, which has had far-reaching consequences on financial markets and consumer sentiment. According to Halifax, the nation’s largest mortgage lender, the average property now stands at £299,677, with annual price growth slowing noticeably. The timing of the conflict coincided with a surge in energy prices, stoking fears that inflation would rise and that anticipated cuts to interest rates might not materialize within the year.

Mortgage rates, which were expected to trend downward before the conflict erupted, have instead climbed sharply. The repercussions have been felt throughout the housing market, as hundreds of the most affordable mortgage deals vanished in just a few weeks. Last month saw the largest single-day withdrawal of deals since the turmoil caused by the 2022 mini-Budget under Prime Minister Liz Truss. While Halifax notes that the recent uptick in mortgage rates is not as abrupt as the spike seen four years ago, it is clear that lenders are acting cautiously in response to the volatile situation.

Amanda Bryden, head of mortgages at Halifax, attributes the slowdown in the housing market to the wide-ranging uncertainty stemming from the conflict in the Middle East. Concerns about higher energy prices have led to increased inflation expectations, prompting a rise in mortgage rates and reducing confidence among buyers that interest rates will fall this year. This has effectively dampened the momentum that had been building in the market at the start of 2026.

Oil prices have been a major factor in this complex equation. Since the US-Israel war with Iran began, oil has surged, fueling inflationary pressures and leading to higher costs for everyday essentials. On Wednesday, Brent crude prices dipped by 15% to $94 per barrel after discussions regarding a conditional ceasefire between Washington and Tehran. However, oil remains 30% more expensive than before the conflict began in late February, and UK mortgage rates have not eased in response to the ceasefire. The average rate on a two-year fixed mortgage rose from 4.83% at the start of March to 5.90%, the highest level since July 2024, according to Moneyfacts, a financial information service.

The persistence of weaker demand in the housing market is closely tied to the longevity of these pressures and their broader impact on the UK economy and employment. Bryden suggests that the future of the housing market depends largely on how these external factors evolve. Mortgage lenders remain cautious, given the ongoing volatility. Adam French, head of consumer finance at Moneyfacts, believes that stability in mortgage rates could return if the ceasefire holds and markets calm, but for now, any movement is expected to slow or pause increases rather than trigger rapid declines.

For buyers and sellers alike, this translates to a housing market characterized by uncertainty. Nicky Stevenson, managing director of Fine and Country estate agents, expects house prices to be "choppy" month-to-month, though she maintains that the bigger picture is one of modest stability. While the immediate outlook may seem unpredictable, Stevenson’s perspective underscores a resilience in the market, supported by a degree of underlying steadiness despite external shocks.

Inflation remains a central concern for policymakers and consumers. In the year to February, the UK inflation rate stood at 3%, with cheaper motor fuel offsets helping to balance the increased cost of clothing and footwear. The Bank of England, targeting a 2% inflation rate, had signaled potential interest rate cuts for 2026, which would have benefited borrowers by reducing mortgage rates. However, surges in petrol and diesel prices since March have pushed fuel costs to their highest levels since late 2022, further complicating the outlook.

The Bank of England faces the challenge of balancing inflation control with economic growth. Raising interest rates to curb inflation makes borrowing more expensive, thus reducing spending by individuals and businesses. While this helps slow price rises, it also risks dampening economic activity. As households grapple with higher mortgage payments and increased living costs, the trade-off becomes more pronounced.

Rachel Winter, partner at wealth management company Killik & Co, recently commented on the BBC’s Today programme that the outlook for inflation may not be as high as previously feared, thanks to renewed optimism about a diplomatic deal. Yet, she cautioned that interest rates are unlikely to decrease this year. This sentiment reflects the prevailing uncertainty among financial experts, who are closely watching geopolitical developments and their impact on domestic markets.

The UK housing market is navigating a challenging landscape shaped by international conflict, elevated energy prices, and rising mortgage rates. While the immediate future may bring continued fluctuations in house prices and mortgage deals, the market appears to retain a measure of stability beneath the surface. Buyers and sellers will need to remain agile and informed as they respond to ongoing changes, with the hope that calmer conditions and favorable economic developments will eventually restore confidence and affordability in the months ahead.