UK house prices edged down in March with the latest Halifax index pointing to a loss of momentum as economic uncertainty and rising mortgage costs begin to weigh on buyer confidence.
Average property values fell by -0.5% during the month, reversing February’s modest +0.3% increase, taking the typical UK house price to £299,677.
Annual growth also softened, easing to +0.8% from +1.2% the previous month, suggesting the market’s early-year resilience is beginning to fade as spring gets underway.
The slowdown comes against a backdrop of renewed volatility in global markets, with rising energy prices and inflation expectations pushing mortgage rates higher and dampening expectations of imminent base rate cuts.
NORTH SOUTH DIVIDE
Northern Ireland remains the strongest performing market, with annual growth of +8.7%, while Scotland recorded a +4.4% increase and Wales saw prices rise +1.6% year-on-year.
Across England, price growth remains concentrated in more affordable northern regions. The North East posted annual growth of +5%, overtaking Scotland, while the North West saw prices rise +3.1%.
But southern markets continue to soften. The South East recorded the largest annual decline, with prices down -1.9%, while London values slipped by -1.2%, reinforcing the ongoing affordability pressures facing buyers in higher-value markets.
The latest figures suggest that while house prices have held relatively steady, underlying activity is becoming more sensitive to external economic pressures – particularly shifts in mortgage pricing.
MIDDLE EAST CRISIS
Amanda Bryden (main picture, inset), Head of Mortgages at Halifax, says: “House prices fell -0.5% in March, following the modest +0.3 per cent increase seen in February. As a result, the average property price is now £299,677. The pace of annual growth has also eased, slowing to +0.8 per cent from +1.2 per cent the previous month, suggesting the market has lost some momentum as spring begins.
“The recent slowdown in the housing market reflects the wide uncertainty regarding the conflict in the Middle East. Concerns about higher energy prices have pushed up inflation expectations, which in turn led to a rise in mortgage rates, reducing confidence that interest rates will be cut this year and dampening the initial momentum in the market seen at the start of the year.”
“House prices may prove resilient.”
She adds: “The effect on house prices will largely depend on how long-lasting these pressures prove to be and the wider implications for the economy and unemployment. Mortgage rates are a key factor for buyers, particularly those getting on the ladder for the first time, who are already balancing the challenge of saving a deposit, with the cost of borrowing. As a result, many are likely to watch movements in mortgage rates closely, before making a decision on any home purchase.
“However, the recent increase in UK mortgage rates has been more modest than the sharp rises seen during the mini budget of 2022. Further, many households will already be on fixed deals, protecting them from the latest rate rises. Taking all this into account, house prices may prove resilient, even if uncertainty weighs on market activity in the near term.”
INDUSTRY REACTION
Nathan Emerson, CEO of Propertymark, says: “We are at an important intersection where we must clearly acknowledge future challenges ahead. We started the year with positivity in terms of seeing an uplift in the average number of viewings per available property, coupled with general consumer positivity regarding affordability.
“However, a lot has changed in a short space of time, with numerous sub 4% mortgage deals being withdrawn over the last few weeks as the wider economy adjusts to potential uncertainties.
“Inflation is expected to increase over the coming months and this is likely to have an immediate effect on consumer affordability.
“The rate of inflation will also play intense influence on the Bank of England regarding base rate decisions over the forthcoming months too.
“In addition, we are also due to see OFGEM make their next decision regarding energy price caps late next month, which again should be highly considered regarding household affordability as the year plays out.”
CAUTIOUS MOOD
Iain McKenzie, CEO of The Guild of Property Professionals, says: “The marginal decline in house prices reflects the cautious mood that is beginning to take hold among some buyers.
“With borrowing costs rising and inflation remaining stubbornly above target, many households are reassessing their budgets and delaying decisions.
“At the same time, the supply of homes for sale has reached an 11-year high, intensifying competition among sellers. In this environment, pricing strategy is absolutely critical, as overpricing is far more likely to result in prolonged time on the market or price reductions.
“That said, the picture is far from one of collapse. Sales agreed remain relatively stable and transaction levels had been improving earlier in the year, indicating there is still a core of committed buyers.
“While forecasts still suggest modest growth over the medium term, the risk of weaker-than-expected performance has increased as economic uncertainty builds.”
TIGHT FINANCIAL HEADROOM
Tom Bill, head of UK residential research at Knight Frank, says: “What goes up must come down, but for mortgage rates the drop will be more gradual than the sharp increase triggered by the Middle East conflict, even if the two-week ceasefire deal holds.
“Sentiment in the housing market will improve if the war stops, but its longer-term inflationary impact and weaker demand for UK government debt due its tight financial headroom and apparent inability to cut spending means mortgage rates won’t snap back to where they were in February. This will keep demand and house prices in check this year.”
PAUSE FOR THOUGHT
Jeremy Leaf, north London estate agent and a former RICS Residential Chairman, says: “Activity picked up encouragingly earlier this year but was stopped in its tracks when it became apparent that fallout from war in the Middle East would be more long-lasting than previously feared.
“Many buyers have been supported by mortgage offers obtained before hostilities started so have been able to take advantage of sellers’ lower expectations.
“This survey form the country’s largest lender confirms what we have seen on the ground – that some of the less-committed have paused while the more serious are negotiating hard so we are only seeing a wobble not a more serious dip in prices.
“However, even if the conflict ends soon, inflation and mortgage rates driven up by oil price rises are likely to persist for a while at least.”
ECONOMIC IMPLICATIONS
Jason Tebb, President of OnTheMarket, says: “The momentum created by several interest rate reductions over the past year and a half, combined with post-Budget clarity, continues to be in evidence on the ground, with needs-driven buyers and sellers who have put moves on hold focused on transacting.
“With further rate reductions on hold for the short term at least, and the threat of rate rises a concern the longer the conflict in the Middle East continues, those with competitive mortgage offers are keen to proceed before rates edge higher.
“While much depends on the length of the conflict and its wider implications for the economy, for now the housing market’s resilience in the face of political and economic uncertainty is apparent as life events will always prompt people to move, whether that’s upsizing, downsizing or relocating.”
INCREASED CAUTION
Amy Reynolds, Head of Sales at Richmond estate agency Antony Roberts, says: “Halifax’s data reinforces what we’re seeing on the ground: prices are broadly stable, with modest growth where supply is tight and homes are priced realistically.
“The Middle East conflict has contributed to increased caution across financial markets. Mortgage rates have already edged upwards, and this is naturally becoming a talking point among applicants.
“We are seeing a slight softening in viewing numbers as some pause to assess the situation; however, the underlying market remains robust. Serious buyers are still very active, with second viewings continuing and sales being agreed at levels typical for this time of year.
“While there is greater awareness of cost, for the right property, committed buyers are continuing to move forward with confidence.”
