UK House Prices Kept Rising Ahead of Iran War, Halifax Says

A home for sale in the UK. Photographer: Chris Ratcliffe/Bloomberg Photo by Chris Ratcliffe /Bloomberg

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(Bloomberg) — UK house prices racked up another record high in February before the fallout from conflict in the Middle East threatened to disrupt the mortgage market.

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Halifax, one of the UK’s biggest mortgage lenders, said average prices climbed 0.3% to £301,151 ($403,000), a second straight monthly rise. On an annual basis, valuations were 1.3% higher, the strongest in four months.

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While it continued a strong start to the year for house prices after 2025’s patchy performance, the US-Israel war with Iran could prevent further falls in interest rates that have been supporting the property market.

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Moneyfacts, a data provider, said earlier this week that a number of lenders were pausing plans to cut mortgage rates, while HSBC and Nationwide Building Society were among a wave of lenders set to increase borrowing costs. Swap rates used to price home loans have risen sharply on expectations that the Bank of England will delay interest-rate cuts in response to rising energy prices.

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“A prolonged conflict in the Middle East would dampen sentiment and delay rate cuts due to rising inflation,” said Tom Bill, head of UK residential research at Knight Frank.

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Homeowners have benefited from gradually cooling mortgage costs in recent years. The BOE has unwound the interest-rate hikes it made to tame double-digit inflation caused by the war in Ukraine. However, mortgage costs are now starting to move higher again with Moneyfacts reporting that the average two-year fixed rate has risen to 4.83%.

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Domestic factors may also weigh on demand for housing, with unemployment rising above 5% to its highest since the pandemic.

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For now, at least, Halifax’s data chimed with recent figures from Nationwide that showed prices climbing 0.3% in February.

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It showed a stark divide in house price performance between London and the south east, and the rest of the country. Valuations are down 2.2% year-on-year in the south east and 1% lower in London.

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Meanwhile, Northern Ireland was the strongest performing region with price growth of 6.3%. In England, the north west and north east continued to see strong gains, with prices rising 2.9% and 3.5% respectively.

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“We think housing will pick-up further this year,” said Ashley Webb, UK economist at Capital Economics. “But if the conflict in the Middle East isn’t resolved swiftly, fewer interest rate cuts and/or softer buyer sentiment could temper that strengthening.

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—With assistance from Andrew Atkinson.

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