London, March 31, 2026, 23:01 BST
UK house prices jumped 0.9% in March, outpacing forecasts, with Nationwide reporting a 2.2% climb year-on-year to £277,186—the biggest monthly increase since December 2024. But the momentum is already under threat: a surge in mortgage rates is dampening buyer appetite and casting doubt on the spring rebound in Britain’s housing market.
The rebound could be fleeting. Nationwide pointed out that in March, markets flipped from expecting two Bank of England rate cuts to betting on three hikes in the coming year. The shift followed the Iran conflict, which sent energy prices up and pushed swap rates higher—those are the market benchmarks lenders use when setting fixed mortgage deals.
Average two-year and five-year fixed mortgage rates climbed to 5.38% and 5.40% on Tuesday, Rightmove’s tracker showed—each up sharply by 0.48 and 0.41 percentage points over the past week. For buyers putting down just 5%, the average two-year rate hit 6.10%. “Market volatility feeds into swap rates,” said Matt Smith, Rightmove’s mortgage expert, noting that the Bank of England’s main rate has been steady at 3.75% since December. Rightmove
Signs of change are emerging. The Bank of England reported 62,584 mortgage approvals in February—a tally that tracks loans signed off ahead of property purchases—but that data predates the most recent jump in rates. Zoopla noted buyer enquiries fell 13% in March from a year earlier, yet agreed sales slipped just 2%, as a narrower group of buyers with financing continued to close deals.
Nationwide chief economist Robert Gardner noted the market has “regained momentum” following a slowdown at the start of the year. Still, Gardner flagged the energy shock as a concern for the outlook, cautioning that if higher funding costs stick around, the gains in affordability could reverse and housing activity might lose steam. Reuters
Forecasts are getting trimmed. Ashley Webb of Capital Economics pointed out that higher mortgage rates and sluggish growth have made it tough to see much movement in house prices this year—maybe a 1% rise, possibly flat, and that’s a drop from the earlier 3.5% call. Reuters said most economists it surveyed last week still expect the Bank of England to keep rates steady in 2026, highlighting just how much uncertainty is out there.
Market trackers don’t line up perfectly, though the regional divide stands out. Zoopla put annual house-price inflation at 1.3%. Nationwide’s quarterly figures told a sharper story—Northern Ireland surged 9.5%, the North West tacked on 3.3%, London edged up 1.7%. East Anglia and the Outer South East dragged, both posting yearly drops.
Sellers may notice the change ahead of others. “Pricing to sell is more important than ever,” said Richard Donnell, Zoopla’s executive director for research, pointing to increasingly choosy buyers. According to Zoopla, homes on the market are up 6% compared with last year, so buyers have more options and leverage, even with affordability under pressure. Zoopla
This doesn’t amount to a full-blown mortgage crunch—at least not yet. According to Nationwide, roughly 90% of current mortgage holders are locked into fixed-rate deals, so the immediate impact is cushioned. Rightmove’s Smith points out that rates are still beneath last year’s peak and buyers have “plenty of choice available.” Zoopla, though, warns that if rates climb further, weaker demand could translate into fewer sales as the year goes on. Nationwide
The crunch isn’t just a headache for homebuyers and sellers. Reuters reports the conflict is throwing a wrench into Prime Minister Keir Starmer’s efforts to ramp up housebuilding. S&P Global’s February PMI pointed to a steep drop in home construction, making March’s uptick seem shaky at best.
