UK house prices fell in March and annual growth slowed, with Halifax saying geopolitical uncertainty and higher mortgage pricing have taken some of the heat out of the market at the start of spring.
Halifax said average house prices fell by 0.5% in March, reversing a 0.3% rise in February and leaving the average UK property value at £299,677.
Annual house price growth also eased to 0.8%, down from 1.2% a month earlier, in a sign that the market has become more subdued after a firmer start to the year.
The lender said Northern Ireland continued to record the strongest annual rate of house price growth of any UK region. In England, the North East posted annual growth of 5.0%, overtaking Scotland.
Amanda Bryden, head of mortgages at Halifax, said: “House prices fell -0.5% in March, following the modest +0.3% 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% from +1.2% 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.
“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.”
Halifax said affordability remains particularly acute for first-time buyers, who are still balancing the challenge of building a deposit against the cost of borrowing.
EFFECTS OF HIGHER BORROWING COSTS
That view was echoed by Karen Noye, mortgage spokesperson at Quilter, who said March was the first full month in which the conflict in Iran had fed through into UK mortgage pricing, making the latest figures an early indication of how higher borrowing costs are affecting the housing market.
Noye said: “Higher energy prices have pushed up inflation expectations and swap rates, forcing lenders to reprice and withdraw products, and leading to a sudden deterioration in affordability.
“Changes in mortgage costs do not feed through to house prices immediately, so any meaningful shift in price momentum linked to the recent rise in borrowing costs is likely to emerge from this point onwards.”
She said the direction of house prices would now depend heavily on whether tensions ease and whether mortgage rates stabilise, with persistently higher borrowing costs more likely to weigh on activity and values in more rate-sensitive parts of the market.
BRISK ACTIVITY
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Mortgage activity remains brisk as borrowers move to secure rates before they edge higher.
“With base-rate expectations off the table for now, the short-term trajectory for mortgage rates is upwards and independent advice is extremely important. Many borrowers are choosing to lock into rates now, ahead of when they need them, in case pricing increases further.”
