London, March 31, 2026, 23:01 BST
UK house prices rose faster than expected in March, but a sharp rise in mortgage costs is already cooling buyer demand and threatening the spring recovery in Britain’s housing market. Nationwide said prices rose 0.9% in the month and 2.2% from a year earlier to £277,186, the strongest monthly gain since December 2024. 1
The rebound matters because it may not last. Nationwide said markets swung in March from pricing two Bank of England rate cuts to pricing three increases over the next 12 months after the conflict involving Iran pushed energy prices higher, driving up swap rates — the market rates lenders use to price fixed mortgage deals. 2
Rightmove’s tracker showed average two-year and five-year fixed mortgage rates at 5.38% and 5.40% on Tuesday, up 0.48 and 0.41 percentage points in a week. Buyers with a 5% deposit were facing average two-year rates of 6.10%. Matt Smith, Rightmove’s mortgage expert, said market volatility “feeds into swap rates” even though the Bank of England’s main rate has been held at 3.75% since December. 3
That is starting to change behaviour on the ground. Bank of England data showed 62,584 mortgage approvals in February, a forward-looking count of loans signed off before a purchase completes, but those figures came before the latest rate shock. Zoopla said buyer enquiries in March were 13% below a year earlier, while sales agreed were only 2% lower because a smaller pool of buyers with finance already in place kept moving. 4
Robert Gardner, Nationwide’s chief economist, said the market had “regained momentum” after slowing around the turn of the year. He also warned that the energy shock was clouding the outlook and said that, if higher funding costs persist, some of the recent improvement in affordability could unwind and housing activity would soften. 1
Analysts are already cutting back expectations. Ashley Webb at Capital Economics said the jump in mortgage rates and weak growth made house-price gains of around 1% or even stagnation more likely this year, down from a 3.5% forecast. Reuters reported that most economists it polled last week still expected the Bank of England to leave rates unchanged in 2026, which shows how unsettled the outlook has become. 1
Different market trackers tell the story slightly differently, but the regional split is clear. Zoopla said annual house-price inflation was 1.3%, while Nationwide’s quarterly data showed Northern Ireland up 9.5%, the North West of England up 3.3% and London up 1.7%. East Anglia and the Outer South East were the weakest regions, both recording annual declines. 5
Sellers are likely to feel that shift first. Richard Donnell, Zoopla’s executive director for research, wrote that “pricing to sell is more important than ever” as buyers turn more selective. Zoopla said the number of homes for sale is 6% higher than a year ago, giving purchasers more room to negotiate even as affordability tightens. 5
But this is not yet a full mortgage crunch. Nationwide said about 90% of existing mortgage holders are on fixed-rate deals, limiting the immediate hit, and Rightmove’s Smith said rates remain below last year’s highs and “there’s plenty of choice available.” If rates rise further, however, Zoopla said weaker demand would likely feed through to fewer sales later in the year. 2
The squeeze matters beyond buyers and sellers. Reuters said the conflict is also complicating Prime Minister Keir Starmer’s push to speed up housebuilding, with S&P Global’s February PMI showing a sharp downturn in house-building. That leaves March’s rebound looking fragile rather than settled. 1
