The escalating conflict in Iran has sent ripples through the UK housing market, significantly impacting seller confidence and buyer demand. Surging oil prices and inflation fears have led to a withdrawal of mortgage products and a rise in interest rates, creating a climate of “fear and uncertainty” for both buyers and sellers.
Estate agents report a significant drop in homeowners listing their properties, with a notable decrease in the percentage of valuations leading to sales. Many potential sellers are hesitant to put their homes on the market, fearing they will not achieve their desired price or that chains will collapse. This sentiment is particularly acute for first-time buyers, who are often the most cautious and are crucial for the market’s lower end.
Martin Short, a homeowner trying to sell his converted Georgian pub for three years, describes the situation as “trapped.” Viewings have plummeted since the conflict began, and despite significant price reductions, he is struggling to find buyers who can proceed. “Everybody’s sitting on their hands,” he stated.
The conflict’s impact extends to the broader economy, with forecasts suggesting a potential £3 billion shortfall in stamp duty revenue for the Treasury. Economists predict a slump in house prices, potentially between 3% and 5% in 2026, which could trigger a “negative wealth effect” and further dampen economic activity. Mortgage rates have seen a dramatic shift, moving from anticipated cuts to potential hikes within a month. The average two-year fixed-rate mortgage has climbed significantly, making borrowing more expensive for prospective buyers.
While overall demand has cooled, first-time buyers, who have experienced the smallest mortgage rate increases, now represent a record share of March purchases. However, sellers have responded more visibly to the changing economic landscape, with confidence softening and fewer homes entering the market. The number of new homes listed for sale fell by 7% year-on-year in March, the largest annual decline since April 2025.
Despite the current anxieties, some experts believe that as financial markets stabilize and fewer rate rises are expected, mortgage rates may ease, potentially rebuilding confidence. However, the volatility of the global conflict means that market conditions remain uncertain.