UK House Prices Rise 0.9% in March but Iran War Clouds Mortgage Outlook
UK house prices rose by 0.9% in March 2026 — the fastest monthly increase since December 2024 — bringing the average property price to £277,186, according to Nationwide's latest index. However, the building society warned that the ongoing US-Israel war on Iran has "clouded the outlook" for the housing market, with mortgage rates rising sharply in response to geopolitical uncertainty.
Annual house price growth accelerated to 2.2% in March, up from 1% in February, surpassing economists' expectations of 0.6% monthly growth. Northern Ireland led all UK regions with a 9.5% year-on-year increase in the first quarter of 2026, bringing the average price there to £225,269.
Regional Variations
The North West of England recorded the second-strongest regional performance, with prices rising 3.3% year-on-year to an average of £229,173, while Scotland saw a 3% increase to £191,747. At the other end of the spectrum, the outer south-east of England — including areas such as Canterbury, the New Forest, Portsmouth, and Winchester — recorded the weakest performance, with a 0.7% year-on-year fall to an average of £336,036.
East Anglia also saw a decline of 0.4%, while house prices in the East and West Midlands and the South West all rose by less than 1% during the first quarter.
The Mortgage Rate Warning
Despite the strong March figures, Nationwide's chief economist Robert Gardner cautioned that the Iran conflict has triggered a sharp rise in longer-term interest rates — the swap rates that underpin fixed-rate mortgage pricing. The average two-year fixed-rate mortgage climbed to 5.77% by late March, up from 4.83% at the start of the month, while five-year fixed rates rose to 5.7% from 4.95%.
Financial markets are now pricing in the possibility of the Bank of England raising its base rate three times over the next 12 months — a significant reversal from earlier expectations of two rate cuts. Mortgage expert Karen Noye of Quilter noted that "expectations of easing borrowing costs and improving affordability at the beginning of the year had been supporting activity, but this progress has been rapidly undone."
Buyer Demand Softening
Separate data from Zoopla indicated that buyer demand in March was down 13% year-on-year, with rising mortgage rates and uncertainty stemming from the Middle East conflict cited as the primary factors. Zoopla's index placed the average UK house price at £270,500 as of February 2026, a 1.3% rise over the past year.
Why It Matters
The housing market data presents a mixed picture for UK homeowners and prospective buyers. While prices have risen strongly in the short term — particularly in Northern Ireland and the North West — the rapid increase in mortgage rates threatens to significantly reduce affordability and dampen activity in the months ahead. For first-time buyers, the combination of higher prices and higher borrowing costs represents a significant additional barrier to homeownership.
What's Next
The Bank of England's Monetary Policy Committee is due to meet in May, with markets closely watching for any signals on the future path of interest rates. The next Nationwide house price index will be published in late April. Full data is available via The Guardian.
