UK House Prices Dip Below £300,000 for First Time This Year as Middle East Tensions Hit Market
UK house prices fell below £300,000 for the first time in 2026 in March, with Halifax data showing a 0.5% monthly decline that brought the average property price to £299,677. The drop marks the first monthly fall of the year and has been attributed primarily to the escalating conflict in the Middle East, which has driven up energy costs, pushed inflation higher, and rattled mortgage markets.
Annual house price growth slowed to 0.8% in March, down from 1.2% in February and below the 1.5% increase economists had anticipated.
Mortgage Rates Rise as Inflation Fears Bite
The geopolitical instability triggered a chain of economic effects that hit the housing market hard. Brent crude oil prices surged to levels not seen in over a year, pushing up energy costs and inflation expectations. In response, mortgage lenders adjusted their fixed-rate offerings upwards, with the average two-year fixed residential mortgage rate reaching 5.84% by the end of March — the highest since July 2024.
Hundreds of mortgage products were withdrawn from the market as lenders reassessed their risk exposure, leaving prospective buyers with fewer options and higher costs. First-time buyers showed clear signs of hesitation, with a decline in search activity and saved listings on property portals.
Northern Ireland Bucks the Trend
The impact was not uniform across the UK. Northern Ireland continued to lead annual house price growth, with average prices up 8.7% over the past year to £224,809. Scotland also saw strong growth of 4.4% annually, while Wales recorded a more modest 1.6% increase.
In England, stronger price growth was concentrated in northern regions, with the North East up 5% annually. Conversely, prices eased in the south, with a 1.9% year-on-year fall in the South East and a 1.2% annual decline in London.
Outlook Cautious but Not Catastrophic
Experts cautioned against reading the March dip as the start of a prolonged crash, citing strong underlying housing demand, stable employment levels, and the potential for geopolitical de-escalation. Many existing homeowners on fixed mortgage deals remain protected from the latest rate rises, creating a split market between those locked into cheaper deals and new buyers facing higher costs.
The effect on house prices will largely depend on the duration of the Middle East conflict and its broader implications for the UK economy.
