Pick-up in house price growth in March ‘could be the calm before the storm’

House price growth picked up in March, but the conflict in the Middle East has clouded the economic outlook and could lead to housing market activity softening, according to a report.

Annual UK house price growth picked up to 2.2% in March, from 1.0% in February, Nationwide Building Society reported.

Property values increased by 0.9% month-on-month, taking the average house price in March to £277,186.

Robert Gardner, Nationwide’s chief economist, said: “The pickup in house price growth suggests that the market had regained momentum after the slowdown recorded around the turn of the year.

“However, the sharp rise in global energy prices in response to developments in the Middle East represents a significant shock to the global economy, clouding the outlook.

“In the near term, UK economic growth is likely to be slower and inflation higher than previously expected, although ultimately the impact will depend on the duration of the shock as well as the policy response.

“The outlook for interest rates is particularly uncertain and dependent on whether the demand or supply side of the economy is more adversely affected.

“Nevertheless, financial market expectations for the future path of (the Bank of England base rate) have shifted dramatically.

“Towards the end of March, three interest rate increases were priced in over the next 12 months, compared to two rate cuts being anticipated before the strikes on Iran.

“This shift has resulted in a sharp rise in longer-term interest rates (swap rates) that underpin fixed-rate mortgage pricing.

“If sustained, this could reverse some of the improvement in housing affordability that has taken place in recent years.

“With consumer sentiment also likely to be dented by the uncertain outlook and the prospect of rising energy costs, housing market activity is likely to soften.”

Mortgage rates have jumped in recent weeks, with financial information website Moneyfacts reporting that hundreds of deals have been withdrawn, with products trickling back into the market but at higher rates.

Mr Gardner said that, with a big proportion of households on fixed-rate mortgages, many are protected from the immediate impact of higher interest rates.

Tom Bill, head of UK residential research at Knight Frank, said: “The impact from the Middle East conflict on the housing market is still in the post.

“The fact mortgage offers last for six months means the effect of higher borrowing costs will filter into the market this spring and summer, putting downwards pressure on prices and transaction volumes.”

Amy Reynolds, head of sales at London-based estate agency Antony Roberts, said: “The Middle East conflict has contributed to increased caution across financial markets. Mortgage rates have already edged upwards in response, and this is naturally becoming a talking point among applicants.

“We are seeing a slight softening in viewing numbers as some buyers pause to assess the situation; however, the underlying market remains robust.”

Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, said the price growth seen in March could “be the calm before the storm, if borrowing costs continue to climb in response to the latest geopolitical shock”.

She added: “Escalating tensions in the Middle East have upended inflation and interest rate expectations, something that could dampen demand if buyers find it harder to secure the mortgages they need.”

Here are average house prices in the first quarter of 2026, followed by the annual change, according to Nationwide Building Society:

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 (includes St Albans, Stevenage, Watford, Luton, Maidstone, Reading, Rochford, Rushmoor, Sevenoaks, Slough, Southend-on-Sea, Elmbridge, Epsom and Ewell, Guildford, Mole Valley, Reigate & Banstead, Runnymede, Spelthorne, Waverley, Woking, Tunbridge Wells, Windsor and Maidenhead, Wokingham), £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 (includes Ashford, Basingstoke and Deane, Bedford, Braintree, Brighton and Hove, Canterbury, Colchester, Dover, Hastings, Lewes, Fareham, Isle of Wight, Maldon, Milton Keynes, New Forest, Oxford, Portsmouth, Southampton, Swale, Tendring, Thanet, Uttlesford, Winchester, Worthing), £336,036, minus 0.7%