The market could be hit by world events, experts warn (Image: Bloomberg, Bloomberg via Getty Images)
Nationwide reports that annual house prices rose by one per cent, yet experts have cautioned that the “property market recovery could be derailed quickly” by the Iran crisis. House prices have also climbed 0.3% month-on-month, with the average UK property now valued at £273,176, up from £270,873 the previous month, according to Nationwide’s House Price Index.
However, experts have warned that Donald Trump‘s strikes on Iran risk destabilising the housing market as oil prices surge, potentially driving inflation higher and pushing mortgage rates back up. This could also prompt the Bank of England to postpone cutting its base rate, specialists cautioned.
Robert Gardner, Nationwide’s chief economist, said: “This reinforces the view of a modest recovery after a dip at the end of 2025, most likely reflecting uncertainty around potential property tax changes ahead of the Budget.”
He added: “Looking across 2025 as whole, total housing market transactions were 10% higher than in 2024. Improved affordability and an easing in credit availability has helped to support first-time buyer activity, with mortgage completions up 18% year on year.
“Home mover transactions involving a mortgage have also recovered over the past year, with activity up 15% year on year. There has also been a gradual increase in the number of buy-to-let purchases involving a mortgage, although activity remains quite subdued compared to historic levels, reflecting the continued headwinds impacting this part of the market.”
Nationwide has given an update (Image: whitemay via Getty Images)
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Mr Gardner continued: “Cash transactions last year were at a similar level to 2024. In recent years, there had been something of a decline in the share of cash purchases, which accounted for 35% of transactions in 2025, down from a peak of 42% in 2023.”
Babek Ismayil, chief executive of homebuying platform OneDome, warned that inflation could surge once more as a result of the Middle East crisis.
He added: “Though the Budget resulted in a sluggish fourth quarter last year, the one positive amid the fiscal uncertainty was ongoing improvements in affordability. Lenders have been doing their utmost to help first-time buyers get onto the ladder and it’s starting to show with transaction levels up. Mortgage rates have also been edging down this year as lenders priced in the likelihood of further rate cuts, but clearly events in the Middle East over the weekend could prove inflationary and now delay any cuts. It’s currently a very fluid situation.”
Shaun Sturgess, director at Swansea-based Sturgess Mortgage Solutions, cautioned that a rise in inflation would push mortgage rates higher once again.
He continued: “It’s been a strong start to 2026 to date with falling mortgage rates at higher loan-to-values and lender affordability improvements oiling property transactions. But following the weekend’s events and strikes on Iran, oil has suddenly become the operative word.
Mortgage rates could be affected (Image: Yui Mok/PA Wire)
“The recovery in the property market Nationwide alludes to could be derailed quite quickly if oil prices continue to rise sharply. The Bank of England’s forecasts, suggesting inflation would be back at around target in the not-too-distant future, are now under threat, as is the prospect of rate cuts in the first half of the year.
“There is every chance swap, and in turn mortgage rates, could start to rise again, which could nip the growing momentum in the bud. It’s going to be a pivotal week ahead.”
Andrew Montlake, chief executive at London-based Coreco, suggested the Bank of England might postpone reducing rates.
He continued: “Prices rose slightly in February, but that could turn quite quickly after this weekend’s events in the Middle East. The impact on the UK economy could be profound. Domestically, more rate cuts this year by the Bank of England were priced in, but this now looks far less likely as oil prices are already headed north and could potentially rise sharply.
“There is every chance swaps will start to move up on Monday, which will be a blow to borrowers. The UK economy and property market, which so desperately needs a rate cut or two, may now have to wait longer. Expect a turbulent week ahead.”
Emma Jones, managing director at Runcorn-based Whenthebanksaysno.co.uk, indicated brokers will be monitoring swap rates in the coming weeks. She added: “Prices rose in February, with affordability a key driver, but a lot has changed in the first two days of March. Inflation falling is no longer guaranteed if oil prices soar and that could jeopardise a rate cut by the Bank of England. Brokers will be watching how swap rates react throughout Monday and there’s every chance mortgage rates could start to rise again.”
Justin Moy, managing director at Chelmsford-based EHF Mortgages, noted that first-time buyers are entering the market at higher price points than previously.
He added: “The House Price Index can mask a multitude of changes within the property sector, these figures don’t always paint the whole scene. First-time buyers are ignoring leasehold properties and looking to jump halfway up the property ladder, while landlords quietly pick up those flats at reduced prices.”
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