NATIONWIDE says annual house prices grew 1% but experts have warned that the “property market recovery could be derailed quickly” by the Iran crisis.
House prices are also up 0.3% month-on-month and the average price in the UK is now £273,176, up from £270,873 last month, Nationwide’s House Price Index showed.
But experts warned that Donald Trump’s strikes on Iran threaten to derail this stability in the housing market as oil prices go up, which will lead to inflation rising, causing mortgage rates to go back up.
This could also lead the Bank of England to delay cutting its base rate, experts added.
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.”
Expect a turbulent week ahead
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.”
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, CEO at homebuying platform OneDome, said inflation could rise again due to 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.”
The recovery in the property market could be derailed
Shaun Sturgess, Director at Swansea-based Sturgess Mortgage Solutions, said inflation rising will make mortgage rates go up 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.
“The recovery in the property market the 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, CEO at London-based Coreco, said the Bank of England could delay cutting rates.
He added: “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.”
The impact on the UK economy could be profound
Emma Jones, Managing Director at Runcorn-based Whenthebanksaysno.co.uk, said brokers will be looking at swap rates in the coming weeks.
She continued: “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, said first-time buyers are entering the market higher than before.
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.”
Photo by Niloy Kumar on Unsplash.
