External global factors are having a big impact on UK economy

UK house prices lost momentum last month as geopolitical tensions and resurgent inflation pushed borrowing costs higher, according to a Midlands-based economist.

The latest Halifax House Price Index, released this week, revealed a 0.5% monthly fall in March 2026, reversing February’s modest 0.3% gain. 

Annual growth has now slowed to just 0.8%, the weakest pace in recent months and well below earlier expectations of a gradual pickup.

Mortgage rates have started climbing again amid global uncertainty, heightened risks from the Middle East conflict and rising UK bond yields. 

Even with reports of a ceasefire, markets now expect the Bank of England to keep interest rates higher for longer. 

This is squeezing purchasing power for both variable and fixed-rate borrowers at a time when consumer price inflation is also picking up.

Housing market is a bellwether for the wider UK economy

Professor Emeritus Joe Nellis, Birmingham-based economic adviser at accountancy and advisory firm MHA, said: “Housing is not just a market. It is a transmission mechanism for consumer confidence, spending and broader economic momentum, and we expect to see the worrying conditions across the global and domestic economy reflected in housing. 

“And yet a stagnating economy and subdued housing market also feed into each other. A slower housing market weakens consumer confidence, limits mobility in the labour market, and dampens spending on big-ticket items, from home improvements to durable goods. If housing stalls, parts of the wider economy will feel it.

Two-speed housing market

“Despite this, we remain in a two-speed housing market. Lower-cost regions across the North, Midlands and Scotland are still growing modestly, supported by relative affordability.

“But in London and the South East, the story is very different. High prices combined with rising mortgage costs are suppressing demand. Transactions are weaker, and price growth is flat at best.”