Mortgage rates rise and energy price concerns push up inflation expectations
UK house prices dropped by 0.5% and went back under £300,000 in March due to the “wide uncertainty regarding the conflict in the Middle East”, according to Halifax.
The bank’s latest house price index (HPI) said the March dip followed a 0.3% increase in February, with the average property price now standing at £299,677.
Meanwhile, annual growth has eased to +0.8% from +1.2% the previous month.
Amanda Bryden, head of mortgages at Halifax, said: “Concerns about higher energy prices have pushed up inflation expectations, which in turn led to a rise in mortgage rates, reducing confidence that interest rates will be cut this year and dampening the initial momentum in the market seen at the start of the year.
“The effect on house prices will largely depend on how long‑lasting these pressures prove to be, and the wider implications for the economy and unemployment.”
However, she described the recent increase in UK mortgage rates as “more modest than the sharp rises seen during the mini-Budget of 2022” and suggested house prices may prove “resilient” despite economic uncertainty as households already on fixed deals would be protected from the latest rate rises.
Ryan Etchells, chief commercial officer at property lender Together, said: “Right now, with so much uncertainty around, the property market is likely to stay relatively subdued. That said, once inflation starts to come back down, we might begin to see things returning to normal.”
Northern Ireland continued to see the largest house price growth, with average prices up +8.7% over the past year to £224,809.
Homes in Scotland now cost an average of £222,716 following an annual +4.4% rise, while Wales recorded a +1.6% increase to £230,909.
In England, the North-east saw prices rise +5% to £184,119 compared to the South-east, which recorded a -1.9% year-on-year decline to £383,573.
Nathan Emerson, chief executive of Propertymark, pointed out that the start of 2026 showed “positivity in terms of seeing an uplift in the average number of viewings per available property [and] general consumer positivity regarding affordability”.
He continued: “However, a lot has changed in a short space of time, with numerous sub 4% mortgage deals being withdrawn over the last few weeks as the wider economy adjusts to potential uncertainties. Inflation is expected to increase over the coming months and this is likely to have an immediate effect on consumer affordability.”
He said that the rate of inflation will have an “intense influence” on the Bank of England’s base rate decisions in the coming months, while the regulator Ofgem is due to make its next decision about energy price caps late next month, which will affect household affordability.
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