UK house prices rose at their fastest pace in almost 18 months in March, although soaring mortgage rates amid the Iran war may have led to a market downturn, according to Nationwide.
The UK’s biggest building society said the average UK house price rose by 0.9% month-on-month in March, the biggest increase since January 2024.
The increase, which compares with the 0.3% increase reported in February and is ahead of economists’ expectations of 0.6% growth, means the average price of a UK home is now £277,186. Annual growth in house prices rose to 2.2% in March, up from 1% in February.
However, Nationwide warned that the US-Israel conflict against Iran had “clouded the outlook”, and financial markets expect the Bank of England’s monetary policy committee to raise interest rates three times in the next 12 months from 3.75%. Before the start of the conflict in the Middle East, analysts had expected a double reduction this year.
“This change has resulted in a significant increase in long-term profitability [swap rates] Robert Gardner, chief economist at Nationwide, said: “With consumer sentiment likely to be hampered by an uncertain outlook and the prospect of rising energy costs, the housing market is likely to weaken.”
Average mortgage rates have risen more than 5% in recent weeks as lenders have struck hundreds of deals in the biggest scramble since the 2022 budget.
On Monday, the average two-year fixed-rate mortgage reached 5.77%, up from 4.83% at the start of March and the highest level since August 2024, according to Moneyfacts.
The five-year average rose from 4.95% at the beginning of the month to 5.7%, the highest level since November 2023.
Karen Noye, credit expert at Quilter, said: “Expectations of lower borrowing costs and a gradual improvement in affordability were supporting activity at the start of the year, but any real progress was made quickly last month.
Since the start of the crisis, mortgage rates have skyrocketed and lenders have been withdrawing products or paying short-term fixed-price agreements.
Northern Ireland continues to show the strongest growth in house prices across the UK, rising by 9.5% year-on-year in the first quarter to £225,269.
The next fastest rate of house price growth was in the north west of England, up 3.3% to £229,173, followed by Scotland, up 3% to £191,747.
Two of the 13 sectors reported in the Countrywide quarterly report on prices across the UK had a year-on-year decline.
The weakest was outside the south east of England – defined by Nationwide as covering cities and towns including Canterbury, the New Forest, Portsmouth and Winchester – which reported a 0.7% year-on-year fall in the first quarter to £336,036.
This was followed by East Anglia where the average price fell by 0.4% to £273,237. House prices across the East and West Midlands, and the South West, all rose by less than 1% in value over the same period.
Amy Reynolds, head of sales at Richmond real estate agency Antony Roberts, said: “The property market continues to show resilience despite global uncertainty.
“We are seeing a slight decrease in the number of observations as some customers stop monitoring the situation.”
#house #prices #rose #sharply #March #Iran #war #expected #fall