UK house prices are expected to continue their downward trend as the ongoing Iran war exacerbates rising mortgage rates. According to a recent analysis, the conflict has led to higher borrowing costs, causing a decline in buyer confidence and subsequently, a decrease in house prices. This development is particularly concerning for first-time buyers, who are already struggling to enter the market due to affordability issues.
Figures from property portal Rightmove suggest that the average house price in the UK has fallen by 2.5% over the past quarter, with some regions experiencing even steeper declines. For instance, in the North East of England, house prices have dropped by 4.1% during the same period. In contrast, areas like London and the South East are witnessing slower declines, with average house prices remaining relatively stable.
The impact of rising mortgage rates on the UK housing market is expected to be significant. With more than 90% of buyers requiring a mortgage to purchase a property, increased borrowing costs are deterring potential buyers and forcing them to re-evaluate their purchasing decisions. According to Halifax, the average two-year fixed mortgage rate has risen by 0.5% in the past month alone, making it even more challenging for buyers to secure a mortgage.
Experts warn that the situation may worsen before it improves, particularly if the Iran war continues to disrupt global oil markets. This, in turn, could lead to further increases in mortgage rates and a more pronounced decline in house prices. The consequences of this scenario would be far-reaching, with first-time buyers and existing homeowners facing significant challenges in the months ahead.
Landlords, too, are likely to feel the pinch as increased borrowing costs make it more difficult for them to secure mortgages and maintain their rental properties. The impact on Help to Buy schemes, which are designed to support first-time buyers, may also be significant. With the government's Help to Buy Equity Loan scheme set to expire in 2023, the decline in house prices and increased mortgage rates may make it even more challenging for buyers to access affordable housing options.