British home prices are predicted to rise more slowly than previously thought, according to a Reuters poll of housing analysts conducted as expectations for interest rate cuts evaporate following the outbreak of war ​in the Middle East.

The average price of a home will rise 2.5 per cent this year and 3 per cent ‌the following two years, the February 27-March 18 poll of 17 analysts found. A December poll predicted a 2.8 per cent lift in 2026 and 3.3 per cent in 2027.

“Looking ahead the Bank of England is going to have a difficult job and interest rates may now have to go ​up,” said Ray Boulger at mortgage broker John Charcol, citing the war on Iran’s impact on inflation.

“There has ​been a change in our outlook.” He now sees prices rising 2 per cent this year and ⁠3 per cent next, down from his 4 per cent prediction for both years in December.

Banks have raised mortgage rates significantly since the ​war started.

DEMAND REMAINS COOL

In London, usually a big draw for foreign investors, prices were expected to rise a more modest 1 per cent ​this year, 2 per cent next and 2.8 per cent in 2028.

Urban home rents are forecast to outstrip home price rises, going up over 3 per cent this year and next.

“After softening in 2025, rental growth on newly let homes across Britain is set to reaccelerate this year, likely running just ​ahead of broader inflation,” said Aneisha Beveridge at estate agency Hamptons.

“Demand remains cooler than it was a few years ago – ​with more renters becoming homeowners, fewer students, and more young adults living with parents for longer – but the bigger story is still ‌supply.”

Beveridge and ⁠other survey respondents mentioned the Renters’ Rights Act, a new law designed to overhaul the private rental market and provide more security for tenants but which critics say is a disincentive to landlords, contributing to the limited supply of homes available to rent.

Having made a series of interest rate reductions, the Bank of England will wait until April or June ​to cut again, according to ​a separate Reuters poll of ⁠economists who have largely abandoned calls for a drop on Thursday as soaring energy prices driven by the Iran war raise inflation risks.

Asked what would happen to affordability for first-time homebuyers, ​over 80 per cent of respondents – 10 of 12 – in the home prices survey said it would ​improve despite ⁠mortgages likely to be more expensive than hoped while saving for an initial deposit is a struggle for those wanting to get on the property ladder.

The average asking price for a first-time buyer property is 226,995 pounds ($303,243) according to property website Rightmove, meaning ⁠saving a ​10 per cent deposit is a pipe dream for many.

“We expect more competitive mortgage ​rates alongside a more muted outlook for price growth will improve affordability,” Marcus Dixon at real estate services firm JLL said.