Mortgage rates and Iran war spook UK housing market

By the Editorial Team · Tuesday, June 30, 2026

Mortgage rates spiked due to the Iran conflict and UK political uncertainty, leading to a 15% drop in property inquiries and a 7% decline in sales over the past month, according to Zoopla's June report. This slowdown, marked by three out of five homes remaining unsold, reflects rising borrowing costs and softening demand, especially among buy-to-let investors, with regional sales also falling notably.

Rising mortgage rates linked to the conflict in Iran, coupled with ongoing political uncertainty in the United Kingdom, have contributed to a slowdown in the housing market, according to recent data. Zoopla’s latest house price index, published on June 30, revealed a 15 percent drop in inquiries to estate agents through its platform over the past four weeks compared to the same timeframe last year. Additionally, agreed property sales declined by 7 percent during this period.

The report highlights that three out of five homes listed for sale since January remain unsold, a situation attributed to higher borrowing costs and broader financial pressures. Following the outbreak of the Iran conflict, interest rates rose, increasing monthly payments on new five-year fixed mortgage deals by an average of £125 nationwide and £244 in London between January and the end of April.

Bank of England figures released on June 29 showed mortgage approvals had fallen to 56,200 in May from 66,000 in April, marking the lowest level since December 2023. Richard Donnell, executive director at Zoopla, noted that higher mortgage interest rates have constrained sales activities and made home purchases less affordable, compounded by political instability. However, he remarked that the current market conditions are not as severe as those following the September 2022 mini-budget, when agreed sales dropped more than 20 percent.

Demand for housing, as measured by inquiries on Zoopla, has decreased across the country with the sharpest declines in more affordable regions, signaling reduced interest among buy-to-let investors. The West Midlands experienced the largest drop in buyer inquiries at 30 percent year-on-year. Other regions recorded declines in agreed sales, including 12 percent in Wales, 11 percent in the East Midlands, and 10 percent in both the East of England and the Southwest. London saw a 9 percent decrease in sales agreed.

Simon Gammon, managing partner at Knight Frank Finance, commented that the May Bank of England data suggested an increasing number of potential borrowers are delaying mortgage applications. He attributed this hesitation to uncertainty over inflation trajectories, rising living costs, and weakened consumer confidence amid a fragile economic outlook.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.