Middle East war: impact on UK homebuyers and sellers

Rising mortgage rates, squeezed product availability and jittery markets. The Middle East conflict is starting to leave its mark on UK property.

With the news dominated by the crisis emerging in the Middle East with the United States of America and Israel spearheading a war with Iran that has encompassed other states, it is inevitable that there will be some impact on the United Kingdom as a whole.

This is more than any political fallout as Downing Street and Parliament endeavour to manage the ramifications of the war. Any major war around the world will see an impact not only globally but also domestically, even though the UK has refused to be involved on the frontline.

Two of the key economic issues that have arisen are the cost of heating the home and filling the car’s fuel tank. Whether the home is heated using oil, electricity or gas, prices for all those types of fuel have spiked in the wake of the hostilities in the Middle East. Central heating oil has almost doubled in price in the aftermath of the first raids on Iran, not helped by an impasse in the Strait of Hormuz, where oil tanker shipping is essentially frozen.

Markets tend to become jittery when major countries become involved in conflict, with prices increasing either because of the limiting of the supply or simply because the financial risk is somewhat mitigated by increasing prices. Confidence is significantly reduced.

What it means for homebuyers

One of the impacts already being felt by homebuyers is the rise in mortgage rates climbing above 5% on average once again. This is according to analysis completed by Moneyfacts, which shows that the average mortgage rate is at its highest since the summer last year, with a number of residential mortgage products being removed from availability. Moneyfacts notes that this is the biggest fall in available mortgage products since the market was hit by the disastrous mini-budget of September 2022.

This is unfortunate for prospective homebuyers, who had been buoyed by the general recent trend of mortgage rates falling and therefore making borrowing money a much more attractive proposition. It is quite likely that the products will be gradually reinstated in some form or other over the coming months, but it is highly dependent on the outcome of what is happening in the Middle East and its ongoing impact on the UK’s finances.

As is always the case with the fluctuating availability of products on the mortgage market, any buyer wishing to purchase with the help of a loan should seek professional guidance from a mortgage broker, who will have all the details of the current products and help you to decide which is best for your needs.

What it means for home sellers

The lot of the vendor has yet to see any significant impact, with Rightmove reporting that the supply of houses for sale has hit an 11-year high, with March showing no indication of this slowing at the moment.

However, while this is encouraging for the moment, as the war enters its third week with no end to it in sight, it is likely that the markets will continue to be spooked, causing mortgage rates to rise and ultimately rattling those people who are less certain about buying a property.

The conclusion of this scenario, with a glut of properties for sale with lessening demand as a direct result of the removal of more favourable mortgage products, is that the forces of supply and demand will come into play, forcing existing homes for sale to drop their prices to secure an agreement with a buyer. This may not be palatable to many sellers, and they might decide to remove their property from sale for the time being, thereby reducing the quantity of housing stock for sale.

How long will the uncertainty last?

It’s a difficult question to answer but it is intrinsically linked to what is going on in the Middle East.

But, even if the American and Israeli forces were to end their war today, the ramifications will still be felt for some time afterwards as the region tries to get back to some semblance of normality.

For now, though, it looks unlikely that there will be a swift end to the war, which means that the markets will remain volatile for a while yet.

Kindly shared by Homeward Legal