The combination of higher mortgage rates and a weaker economy due to the Iran war means we now expect the improvement in housing demand to be softer and slower than before than war and house prices to grow by 1.5% in the year to Q4 2026 compared to 3.5% previously. While higher mortgage rates may shift some demand from the homebuying market to the rental market, we think that will be more than offset by softer pay growth in our baseline scenario and market rents will grow by 2.5% this year versus 2.8% before the war. (Clients can explore and download all our UK housing forecasts in our UK Housing data dashboard.)