The announcement of a deal to end hostilities between the US and Iran will not lead to a turnaround for the muted UK housing market, warns Knight Frank.

President Trump says the agreement means that the Strait of Hormuz would be open to commercial shipping and the US would lift its naval blockade.

But buyers and sellers in the UK, whose actions have led to an unusual June asking price dip reported by Rightmove this week, have other things on their mind.

Tom Bill, head of UK residential research at Knight Frank, says:“The Middle East conflict has sapped seasonal momentum from the housing market. Prices and transaction numbers are softer than expected for the time of year as higher mortgage rates take their toll on buyers. 

“Activity will be kept in check for the foreseeable future as the Bank of England holds rates steady [expected on Thursday] and political uncertainty ramps up after this week’s by-election, which means we expect modest UK house price growth of 1.5% this year.”

The Bank of England’s monetary policy committee (MPC) meets this week to decide on the base rate.

Last week the European Central Bank – whose actions are sometimes a guide to MPC decisions – increased borrowing costs by 0.25 percentage points to 2.25%.

Justifying the increase, the ECB said the conflict in the Middle East had pushed up energy costs, driving inflation higher across the eurozone, and warned of upside risks to inflation and downside risks to economic growth.

In the UK there is the additional uncertainty that the Makerfield by-election, also taking place on Thursday, may trigger a Labour leadership contest producing a new Prime Minister who some anticipate will be less market-friendly than Sir Kier Starmer.