UK property prices edged lower in March, reversing earlier gains as borrowing costs increased and buyer confidence weakened. The shift reflects growing uncertainty linked to the conflict in the Middle East and its economic ripple effects.
The average home price fell by 0.5% to £299,677, according to Halifax, marking a slowdown after modest growth at the start of the year. Annual price growth also eased, suggesting a cooling market during what is typically a more active spring period.
Mortgage Rate Surge Reshapes Housing Demand
The recent decline in house prices closely follows a sharp rise in mortgage rates, which has reduced affordability for many prospective buyers. According to Halifax, the average rate for a two-year fixed mortgage climbed significantly in March, reaching levels not seen since mid-2024.
This increase has been driven in part by higher inflation expectations, themselves linked to rising energy prices following the outbreak of conflict in the Middle East. According to BBC reporting, oil prices surged after the conflict began, raising concerns that inflation could remain elevated and delay any potential interest rate cuts by the Bank of England.
As borrowing becomes more expensive, lenders have also pulled back on available products. Hundreds of mortgage deals have been withdrawn in recent weeks, with one of the largest single-day reductions since the market turmoil following the UK’s 2022 mini-budget. According to Moneyfacts data cited by the BBC, the average two-year fixed rate rose from 4.83% at the beginning of March to around 5.90%.
Halifax’s head of mortgages, Amanda Bryden, said the slowdown reflects “wide uncertainty regarding the conflict in the Middle East,” adding that higher expected inflation has reduced confidence that interest rates will fall this year. This combination has dampened the momentum seen earlier in 2026.
Regional Divergence and Cautious Outlook for the Market
Despite the monthly decline, the broader housing market presents a mixed picture across regions. According to data reported by The Guardian, Northern Ireland recorded the strongest annual growth, with prices rising by 8.7% to £224,809. Scotland and Wales also posted increases, though at more moderate levels.
In contrast, southern England has seen weaker performance. London prices fell by 1.2% year-on-year, while the south-east recorded a larger decline of 1.9%, reflecting regional imbalances in affordability and demand.
Market activity has also shown signs of strain beyond pricing. According to S&P Global data cited by The Guardian, UK housebuilding activity declined in March, with falling orders and rising input costs linked to higher fuel and material prices. Survey respondents pointed to fragile consumer confidence and delayed investment decisions following the escalation of geopolitical tensions.
Even so, some stability remains. Halifax noted that many homeowners are insulated from immediate rate increases due to existing fixed-rate mortgage deals. Bryden stated that future price movements will depend on how long current pressures persist and their broader impact on employment and the economy.
There are also indications that conditions could stabilize if geopolitical risks ease. A proposed ceasefire has already led to a drop in oil prices, though this has not yet translated into lower mortgage rates. For now, the housing market appears to be entering a more cautious phase, with buyers and lenders closely watching inflation trends and interest rate signals before making
