At the start of 2026, lenders and estate agents predicted a recovery in the housing market. However, the Iran war and subsequent rise in oil prices and economic uncertainty have significantly shifted the UK house price forecast 2026, with rising inflation and interest rates threatening that early confidence.
The economic headwinds facing the housing market
The latest Consumer Price Index (CPI) data shows inflation rose from 3% in February to 3.3% in March, highlighting the impact of the Iran war and rising fuel prices. Unemployment seems to be on the way up and wage growth has stalled.
That is a combination that usually leads to the Bank of England cutting interest rates, but inflation rising with oil and gas prices that is looking unlikely. On the 30th April 2026 the Bank of England decided to keep the central interest rate at 3.75%, and with anticipated cuts in bank rate now looking more distant, mortgage lenders are hiking rather than easing the cost of a mortgage.
The average two-year fixed deal rose from 4.83% at the start of March to 5.82% as of 22 April, while the average five-year fix rose from 4.95% to 5.72%.
Understanding the impact on house prices
Higher mortgage rates and tight household budgets are affecting the housing market.
The Halifax actually reported a fall of 0.5% between February and March. The other indices are less pessimistic.
Unlike Nationwide and Halifax’s figures, which are based on the lender’s valuations at the mortgage-approval stage, Rightmove’s view is based on asking prices, and is up 0.8%.
According to Rightmove, the average UK property asking price is £373,971 up from £371,042 in March. Nationwide puts it at £278,880, demonstrating the difficulty of knowing exactly what is going on.
The consensus seems to be that the market is remaining steady despite recent surges in mortgage rates. But all these figures are based on past activity. It may still be too early to understand how the Iran war is really affecting the market.
Regional surges: Where house prices are still growing
Although growth overall is subdued some regions are seeing surges in house prices.
Land Registry figures show average property prices in Northern Ireland up 6.3% over the past year to £195,936. The UK House Price Index Scotland February 2026, showed the annual price change of a property in Scotland was 2.3%.
Meanwhile, average house prices in the 12 months to February 2026 increased by 0.8% in England to £290,000, by 2.5% in Wales to £210,000 and by 2.3% in Scotland to £187,000.
Of the English regions, annual house price inflation was highest in Yorkshire and the Humber, where prices increased by 3.9% annually in February 2026. In contrast, average prices actually fell in London by 3.3%.
The outlook for buyers and sellers in 2026
The Royal Institution of Chartered Surveyors (RICS) RICS reports new buyer enquiries slipped to -39%, down from -29% in February. This may be due to higher interest rates pricing more people out of the market.
Sellers may have to cut their prices to make a sale or hang on in the hope that things improve. For those with mortgage repayments that they are struggling with, and for those planning to downsize as part of considered retirement strategy, these are worrying times.
However, the true picture may not be as bleak as the doomsayers would paint it. The situation in the middle east may still resolve itself one way or another, and if inflation then peaks, it could calm the need for base rate hikes.
What’s more, when tensions eventually ease, it could potentially lead to mortgage rates falling rather than rising.
What can you do in a changing market?
It may feel challenging, but if you need to make a move and are in position to buy, you may be able to secure a bargain by acting now rather than waiting, simply because there could be less competition for the home you want.
To proceed, you’ll likely need to demonstrate that you’re in a strong position to do so. The most effective way to show this is with an agreement in principle, confirming that you have mortgage finance in place.
Call us at Continuum. We’ll search the market for the deal that’s most appropriate for you and help get the offer in principle you want.
What are the Consumer Price Index inflation release dates? | MoneyWeek
CPI Inflation vs RPI Inflation | MoneyWeek
March 2026 Halifax house price index
Latest UK Mortgage News – Forbes Advisor UK
What’s happening with UK house prices? Latest property forecasts for 2026 | MoneyWeek
Base rate held AGAIN at 3.75% – here’s what it means for you
UK House Price Index Scotland: February 2026 – GOV.UK
This article is intended for general guidance only and is based on the opinion of Continuum it does not constitute financial advice. Individual circumstances vary, and you should consider seeking advice from a regulated financial adviser before making any decisions about your mortgage planning.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Independent mortgage advice
From first-time buyers to remortgaging and equity release, find out how our whole-of-market advisers help you find the right deal for your circumstances.
See how we can help
