Annual UK house price growth picked up to 2.2% in March, rising from 1.0% in February, according to a report from Nationwide Building Society. This increase suggests a resurgence in market momentum after a slowdown earlier in the year. Property values saw a month-on-month rise of 0.9%, pushing the average house price to £277,186.
Economic Outlook Clouded by Geopolitical Tensions
Robert Gardner, Nationwide’s chief economist, highlighted that the sharp rise in global energy prices, driven by developments in the Middle East, represents a significant shock to the global economy. He noted that this could lead to slower UK economic growth and higher inflation than previously anticipated. The impact will largely depend on the duration of the conflict and the policy responses implemented.
Interest Rate Uncertainty and Mortgage Market Effects
Gardner explained that the outlook for interest rates is particularly uncertain, with financial market expectations shifting dramatically. By the end of March, markets were pricing in three interest rate increases over the next 12 months, a stark contrast to the two rate cuts anticipated before the strikes on Iran. This shift has caused a sharp rise in longer-term interest rates, which underpin fixed-rate mortgage pricing.
If sustained, this could reverse some of the improvements in housing affordability seen in recent years. With consumer sentiment likely to be dented by the uncertain outlook and rising energy costs, housing market activity is expected to soften.
Mortgage Rates and Market Activity
Mortgage rates have already jumped in recent weeks, with financial information website Moneyfacts reporting that hundreds of deals have been withdrawn. Although products are trickling back into the market, they are doing so at higher rates. Gardner pointed out that many households on fixed-rate mortgages are protected from immediate impacts, but new buyers may face challenges.
Tom Bill, head of UK residential research at Knight Frank, commented that the effects of the Middle East conflict on the housing market are still in the post. He noted that mortgage offers typically last for six months, meaning the impact of higher borrowing costs will filter into the market this spring and summer, potentially putting downward pressure on prices and transaction volumes.
Regional House Price Variations
Nationwide provided a breakdown of average house prices and annual changes for the first quarter of 2026 across UK regions:
- Northern Ireland: £225,269, 9.5%
- North West: £229,173, 3.3%
- Scotland: £191,747, 3.0%
- Wales: £215,411, 2.7%
- North East: £170,378, 2.6%
- London: £538,181, 1.7%
- Yorkshire and the Humber: £214,866, 1.6%
- Outer Metropolitan: £430,260, 1.0%
- East Midlands: £236,016, 0.3%
- South West: £305,701, 0.1%
- West Midlands: £249,722, 0.0%
- East Anglia: £273,237, minus 0.4%
- Outer South East: £336,036, minus 0.7%
Expert Warnings of a Potential Storm Ahead
Amy Reynolds, head of sales at London-based estate agency Antony Roberts, observed that the Middle East conflict has contributed to increased caution across financial markets. Mortgage rates have edged upwards, becoming a talking point among applicants. She reported a slight softening in viewing numbers as some buyers pause to assess the situation, though the underlying market remains robust.
Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, warned that the price growth seen in March could be the calm before the storm. She stated that escalating tensions in the Middle East have upended inflation and interest rate expectations, which could dampen demand if buyers find it harder to secure mortgages.
Overall, while March showed a pickup in house price growth, experts caution that the full effects of the Middle East conflict have not yet filtered into the figures, with potential challenges ahead for the UK housing market.
