UK House Prices Rise Before Iran War Uncertainty
UK housing market reaches new price record
House prices in the United Kingdom continued to rise in February 2026, reaching a new record level, although the market outlook may face pressure from geopolitical developments. According to data from Halifax, one of the country’s largest mortgage lenders, the average property price increased by 0.3% to £301,151.
This marked the second consecutive monthly increase. On an annual basis, house prices were 1.3% higher, the strongest yearly growth in four months.
The data suggests that the housing market started 2026 on a stronger footing after a mixed performance throughout 2025.
Middle East conflict could affect mortgage rates
Despite the recent price gains, economists warn that geopolitical tensions in the Middle East could affect the outlook for the UK housing market. The conflict involving Iran and its regional escalation has raised concerns that interest-rate cuts may be delayed.
Higher energy prices driven by geopolitical tensions could increase inflationary pressures and make the Bank of England more cautious about easing monetary policy.
Tom Bill, head of UK residential research at Knight Frank, said that a prolonged conflict in the Middle East could weaken buyer sentiment and delay interest-rate reductions because of rising inflation risks.
Banks begin adjusting mortgage pricing
Several lenders have already started to revise their mortgage pricing strategies. According to financial data provider Moneyfacts, some banks have paused plans to reduce mortgage rates.
Major lenders including HSBC and Nationwide Building Society are among those increasing borrowing costs. This reflects rising swap rates, which are widely used by lenders to price mortgage products.
Expectations that the Bank of England could delay interest-rate cuts due to rising energy prices are already feeding into the cost of home loans.
Mortgage rates begin rising again
After a period of gradually declining borrowing costs, mortgage rates are beginning to increase again. Moneyfacts reports that the average two-year fixed mortgage rate has risen to 4.83%.
In recent years homeowners benefited from cooling mortgage costs as the Bank of England started reversing the aggressive interest-rate increases introduced to tackle double-digit inflation triggered by the energy crisis and the war in Ukraine.
However, renewed inflation risks may alter the trajectory of monetary policy.
Regional divide in house price performance
Halifax data also highlights significant regional differences in the housing market. London and the South East of England are currently showing weaker price performance.
Property values in the South East are down 2.2% compared with a year earlier, while prices in London have fallen by about 1%.
Northern Ireland remains the strongest-performing region with annual house price growth of 6.3%. Within England, the North West and North East continue to record solid gains of 2.9% and 3.5% respectively.
Housing outlook tied to global economic conditions
Economists believe the housing market could continue to strengthen through 2026, although geopolitical risks remain a key uncertainty.
Ashley Webb, UK economist at Capital Economics, said the housing market is likely to recover further this year. However, if the Middle East conflict persists, fewer interest-rate cuts and weaker buyer sentiment could limit that improvement.
As International Investment experts report, the UK housing market entered 2026 with moderate price growth following a volatile period. Future trends will largely depend on global inflation risks, energy prices and the Bank of England’s decisions on interest rates.