Average UK house prices fell by 0.5% in March, according to Halifax, as mortgage rates driven higher by the repercussions of the Iran war dampened demand.

The average property price is now £299,677 while annual growth has also slowed, the UK's biggest mortgage lender said.

The drop reverses a 0.3% rise in February before the beginning of the conflict which drove up energy costs, raising fears that inflation could climb and there would be no cuts to interest rates this year.

Mortgage rates have jumped and hundreds of the cheapest deals have disappeared over the last few weeks.

Last month saw the biggest daily withdrawal of deals since the disastrous mini-Budget in 2022 under the then Prime Minister Liz Truss.

But Halifax said the recent increase in mortgage rates had not been as sharp as four years ago.

Amanda Bryden, head of mortgages at Halifax, said: "The recent slowdown in the housing market reflects the wide uncertainty regarding the conflict in the Middle East.

"Concerns about higher energy prices have pushed up inflation expectations, which in turn led to a rise in mortgage rates, reducing confidence that interest rates will be cut this year and dampening the initial momentum in the market seen at the start of the year."

Commenting on how long weaker demand might last, Bryden said it would "largely depend on how long‑lasting these pressures prove to be and the wider implications for the economy and unemployment".

The prime minister welcomes the deal, saying the UK will do "all we can to support and sustain this ceasefire".

The path to the two-week ceasefire with Iran may have fundamentally altered the way the rest of the world views the US.

Crude prices tumbled by as much as 15% on the conditional pause but is higher than before the war.

Conflict spread across the Middle East after the US and Israel launched strikes on Iran on 28 February.

Tehran says it has agreed to open the Strait of Hormuz for two weeks "if attacks against Iran are halted".