UK house prices rose 0.3% in February, halifax says

UK house prices rise but inflation fears cloud outlook

Latest trends and challenges in the UK housing market

By Suban Abdulla

House price growth accelerates in February

LONDON, March 6 (Reuters) - British house prices rose in February at the fastest pace since October, data showed on Friday, but lenders raised their mortgage rates over concerns the Middle East conflict could lead to higher inflation and halt a run of cuts to borrowing costs.

Halifax said house prices were 1.3% higher in the 12 months to February than a year earlier, above the 0.9% forecast in a Reuters poll of economists and up from 1.1% growth in January.

Prices rose 0.3% month-on-month in February, in line with the poll forecast but below January's 0.8% increase.

Rising borrowing costs and mortgage rates

An indicator for future borrowing costs for homebuyers has risen this week.

The average two-year fixed residential mortgage rate climbed to 4.84%, according to data provider Moneyfacts, which said rates had been gradually falling as an interest rate cut by the Bank of England had been priced in for March until the end of last week.

Swap rates, a key measure lenders use to determine the cost of mortgage borrowing, have also soared. Two-year swaps jumped as much as 0.42 percentage points over the course of this week.

Geopolitical risks and inflation outlook

Impact of global events on UK inflation

GEOPOLITICAL RISKS CLOUD RATE OUTLOOK

Amanda Bryden, Halifax's head of mortgages, said geopolitical uncertainty could influence the outlook for inflation and the wider economy.

Britain's inflation rate fell to a one-year low at the start of the year, and the BoE expects it to drop near its 2% target in April.

Expert opinions on interest rates

Matt Swannell, chief economic adviser to the EY ITEM Club, said interest rates could stay higher for longer if the escalation in the Middle East conflict persisted, potentially affecting the housing market.

"The sharp rise in oil and, particularly, gas prices has caused financial markets to reassess the speed and extent to which the (BoE's) Monetary Policy Committee will likely lower interest rates," Swannell said.

Adam French, head of consumer finance at Moneyfacts, said some lenders started to raise mortgage rates this week.

The BoE is expected to keep interest rates at 3.75% this month after holding them in February.

Financial markets were on Friday no longer fully pricing in an interest rate cut by the BoE during 2026, down from expectations of two quarter-point cuts at the end of last week before the conflict began.

The BoE said on Thursday that the number of mortgages approved by British lenders for house purchases fell unexpectedlyin January to the lowest in two years.

Market momentum and ongoing challenges

Affordability and supply constraints

MARKET GATHERS PACE BUT CHALLENGES REMAIN

February's figures suggested some momentum in the housing market after a softer end to 2025, but affordability remained stretched and supply constrained, Halifax said.

Prime Minister Keir Starmer's government wants to speed up construction of new homes, but a shortage of properties for sale is likely to keep upward pressure on prices.

Comparative data from other sources

Data from rival lender Nationwide, published on Monday, showed prices rose by 0.3% in February, taking annual house price inflation to 1.0%.

Separate figures from S&P Global on Thursday showed Britain's construction sector extended its longest run of decline, with the PMI pointing to a sharp downturn in housebuilding.

(Reporting by Suban Abdulla; Editing by Kate Holton, Catarina Demony, Nivedita Bhattacharjee and Alex Richardson)