A Market Caught Between Two Forces

This week, the UK property market finds itself squeezed between two powerful and opposing forces: on one side, a genuine improvement in buyer activity and stock levels that pointed to a more confident start to 2026; on the other, a sharp deterioration in the global geopolitical backdrop — particularly the escalation of conflict involving Iran — that is now pushing mortgage rates higher and delaying the interest rate relief that buyers had been waiting for.

The picture, as we read it this week, is not one of collapse. But it is a market that has become more selective, more cautious, and more sensitive to external shocks than many had expected at the start of the year.

The Bank of England Holds — And the Mortgage Market Reacts

The week’s most significant event for property was the Bank of England’s Monetary Policy Committee decision on 19 March: the base rate was held at 3.75%, unanimously.

Just a few weeks ago, a cut had seemed almost certain. That consensus has now been overturned. The MPC explicitly cited the Middle East situation and its potential impact on global energy supply and prices as a key factor. With CPI inflation at 3.2% in January — still well above the Bank’s 2% target — and oil and gas prices spiking on the back of strikes on Iranian and Qatari infrastructure, policymakers chose caution.

The reaction in the mortgage market was swift. Over the past fortnight, lenders have pulled or repriced hundreds of mortgage products. Five-year swap rates — which underpin fixed-rate mortgage pricing — have jumped sharply, and the average two-year fixed rate has risen from around 4.82% to above 5.20%. The best five-year fixed deal available in March 2026 sits at around 4.10%. Rates had, briefly, looked like they were heading towards the 3s. That conversation is now on hold.

Mark Harris of SPF Private Clients summarised the mood well: there was very little realistic chance of a cut this month given the uncertainty. The next MPC decision is scheduled for 30 April 2026, and the market will be watching closely.

For investors and buyers, the message is clear: mortgage affordability is not going to improve at the pace previously expected. Planning, patience, and locking in rates where possible are now more important than ever.

Supply is Up — But Demand Has Softened

Setting aside the rate picture, the underlying market data for early 2026 tells an interesting story of increasing supply meeting more selective demand.

According to the latest market statistics (week ending 15 March 2026):

362,000 new properties have come to market year-to-date — 20% above the 2017–19 pre-pandemic average and 8.7% ahead of this time last year.
The average estate agent began 2026 with 32 homes for sale, the highest level at the start of a year in eight years.

Yet agreed sales year-to-date are running 3% below 2025 — though still 8.4% ahead of 2024 and 14.1% above pre-Covid norms.

The RICS February 2026 Residential Market Survey reinforced this: new buyer enquiries fell to a net balance of -26 (down from -15 in January), and agreed sales posted a net balance of -12. However — and this is important for investors — the twelve-month sales outlook remains positive at +17. Buyers are still in the market; they are simply proceeding more carefully, negotiating harder, and taking longer to commit.

Rightmove’s March data paints a similar picture: sales agreed are running just 2% below the strong market of 2025, and 5% ahead of 2024. The market is functioning — but it is not rushing.

House Prices: Modest Growth, But Falling in Real Terms

Nationwide reports that UK house prices rose 0.4% in February, with annual growth holding at 1.0% — unchanged from January and in line with the pattern across all of 2025. The average UK house price sits at approximately £273,176 (Nationwide) or £270,259 on the HM Land Registry’s December 2025 index.

Halifax, meanwhile, puts the average property price at £301,151, reporting a 0.3% monthly rise in February.

Savills notes in their March 2026 update that with nominal growth running at just 1.0%, national house prices are “still falling on an inflation-adjusted basis.” This is not a market in sharp decline — but it is one where purchasing power is eroding gently for those sitting on the sidelines.

The headline forecasts from the major agencies for 2026 as a whole remain modestly positive: Savills expects around 2% national growth; Knight Frank is forecasting approximately 3%. Both figures are below wage growth, meaning affordability is gradually improving for buyers — just not as fast as hoped.

Knight Frank: Politics and Prime London

Knight Frank’s data on prime central London (PCL) makes sober reading. Prices in PCL fell 4.9% in the year to February 2026, little changed from the 5.0% decline recorded in January. In prime outer London, the annual decline reached -0.5% in February — the widest negative reading in 21 months.

Tom Bill, Head of UK Residential Research at Knight Frank, noted this week that activity in the property market is “likely to soften as the Westminster drama escalates further.” The number of exchanges in prime central and outer London was 11% lower in the year to January compared with the previous 12 months. Supply is recovering faster than demand: new instructions in January ran 16% above the five-year average, while new buyer registrations were 4% lower.

This creates a buyers’ market in the prime segment — more choice, more negotiating power, and sellers who are increasingly realistic on price. For buyers with capital ready to deploy, this is a window that may not persist indefinitely. Prime London has historically recovered strongly once rate and political headwinds clear.

Savills: A Stronger Start to 2026 — With Caveats

Savills’ March 2026 housing market update offers a slightly more encouraging read of the mainstream market. For the first time since September 2025, agreed sales in February were above the level of a year ago — a meaningful signal that confidence is returning at the needs-based end of the market.

Savills also raises their cross-sector 2026–2030 total return forecast to 7.8% annualised, with 13 UK property sub-sectors expected to deliver returns above 8%. Rental growth, they note, is likely to remain elevated due to persistent supply constraints — development viability remains challenging, and shortages of prime assets are keeping upward pressure on rents.

Their view on the residential market is balanced: the stronger start to 2026 is encouraging, but the economic outlook remains subdued, and prolonged geopolitical tension — particularly energy price volatility — could add to existing pressures. Needs-based buyers will continue to drive transactions in the near term, with limited upward pressure on prices nationally.

The North-South Divide Continues

One of the clearest structural themes in 2026 remains regional divergence. The lower-value markets of the Midlands, Northern England, Wales, and Scotland continue to outperform London and the South East, where affordability constraints are most acute.

In London and the wider South East, Savills and Knight Frank both expect growth of only around 1–2% in 2026. By contrast, cities with strong employment growth and improving infrastructure — Manchester, Leeds, Birmingham — are expected to attract greater investor and occupier demand.

Notably, flats continue to underperform houses across the board. Nationwide data shows flats fell in value by an average of 0.9% over the past year, while semi-detached houses rose 2.4%, detached properties 2.2%, and terraced houses 1.8%.

For investors, this underlines the continued case for well-located houses — particularly in northern cities — over central London flats as the primary vehicle for capital growth in the near term.

The Rental Market: Renters’ Rights Act Approaching

One further factor worth flagging for landlords: the Renters’ Rights Act comes into force on 1 May 2026. Market commentators are anticipating a temporary pause in rental market activity between now and the summer as both landlords and tenants adopt a “wait and see” approach ahead of implementation.

The longer-term impact is likely to be a further reduction in rental supply — landlords selling ahead of increased regulation — which will sustain upward pressure on rents. Knight Frank had already forecast prime London rents rising by 4% in 2026, partially driven by landlords exiting the market. For buy-to-let investors with a long-term horizon, this dynamic — rising rents, constrained supply — supports the case for maintaining well-managed rental properties.

Our Read of the Week

The UK property market in March 2026 is one of adjustment, not alarm. Supply is healthier than it has been in years. Buyers have more choice and more negotiating power. Forecasters agree that prices will end the year modestly higher than they started it. And the longer-term structural case — rental demand, supply shortage, London’s global standing — remains firmly intact.

But the short-term environment has become more complex. The Bank of England’s hold, rising swap rates, and geopolitical uncertainty are all combining to delay the affordability improvement that was meant to unlock the next phase of growth. Buyers who were waiting for cheaper mortgages may need to wait longer.

For our investors, particularly those with overseas capital looking to enter the UK market: conditions like these often represent the most interesting entry points. You are buying into a period of price restraint, before the cycle turns. That is precisely where patient, long-term capital has historically found its best opportunities.