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A major UK housebuilder has warned that the ongoing conflict involving Iran could weaken homebuyer confidence, as rising inflation fears and the prospect of prolonged high interest rates begin to weigh on the housing market.
Persimmon, one of the UK’s largest residential developers, said it is closely monitoring how the geopolitical tensions may affect property demand throughout 2026. The company noted that buyer sentiment could become increasingly fragile as financial uncertainty grows.
In a statement released Tuesday, Persimmon said it has not based its forecasts on potential mortgage rate cuts or new government stimulus measures to support housing demand. Instead, the company emphasized that short-term performance will largely depend on how consumers react to the uncertain economic outlook.
Despite these concerns, Persimmon expects to complete between 12,000 and 12,500 homes in 2026, slightly more than the number delivered in 2025. However, the forecast assumes that the conflict in Iran remains relatively short-lived and does not significantly disrupt economic conditions.
Meanwhile, several major lenders—including HSBC, Nationwide, and Coventry Building Society—have already started increasing fixed mortgage rates. Analysts warn that rising global energy prices linked to the Middle East conflict could push inflation higher in the UK, putting additional pressure on borrowers.
If inflation rises further, the Bank of England may be forced to delay interest rate cuts or even consider raising rates again. Investors previously expected the central bank to reduce the base rate at its next meeting on 19 March, but markets now anticipate the rate will likely remain at 3.75% for the rest of the year, with the possibility of increasing to 4% by June next year.
Consumer sentiment has already begun to weaken. A survey by Barclays found that confidence in the UK economy has fallen since the conflict began. The bank’s consumer confidence index dropped two percentage points to 23%, reversing gains recorded earlier in the year.
The survey, conducted among around 2,000 UK residents following the initial US-Israeli strikes on Iran, revealed that nearly four in five people fear the conflict will drive inflation higher. Many respondents said they are particularly worried about rising fuel costs, energy bills, and food prices.
Around three-fifths of those surveyed also expressed concerns that the situation could negatively affect their personal finances.
According to Aarin Chiekrie, an equity analyst at Hargreaves Lansdown, higher oil prices triggered by the conflict are already reducing the likelihood of interest rate cuts in 2026.
“The ongoing war in Iran and the resulting rise in oil prices make it less likely that interest rates will fall this year,” Chiekrie said. “That directly affects housing affordability and could keep pressure on buyers for some time.”
Persimmon added that the full impact of the conflict on construction costs remains unclear. However, the company expects any immediate effects to be limited because of existing supply agreements and strong production levels heading into 2026.
Encouragingly for the builder, demand has remained resilient so far. During the first nine weeks of the year, Persimmon reported a 9% increase in net private sales compared with the same period in 2025, while average home prices rose by 6%.
Chief executive Dean Finch said the company has a clear view of its costs and demand from registered housing providers and build-to-rent projects. However, he acknowledged that the broader economic impact of the Iran conflict on potential buyers remains uncertain.
