Economic Backdrop
The year opened with a degree of tentative optimism, driven by expectations of stabilising inflation, improving consumer sentiment, and the prospect of gradual interest rate reductions. However, by spring, this outlook had shifted markedly. The conflict in Iran has introduced a renewed wave of geopolitical uncertainty, sending shockwaves through global energy markets and re igniting inflationary pressures at precisely the moment the UK economy appeared to be regaining its footing.
Volatile oil and gas prices have complicated the Bank of England’s long anticipated path toward monetary easing, with markets now pricing in a slower and more hesitant series of rate cuts than forecast at the start of the year. This has contributed to a more subdued business environment, with developers, investors, and lenders all reassessing risk exposure.
Hopes for a demand-side stimulus, particularly in the form of measures for first time buyers or incentives for new housing supply, were not realised. The 2026 Spring Statement delivered no new housing initiatives, as the Government opted to prioritise fiscal discipline and long-term macroeconomic stability over intervention.
House Prices
Despite wider uncertainty, house price performance has remained broadly stable, with modest growth seen in the early part of the year. Major national indices continue to report annual price increases of around 1%, with some datasets showing new nominal highs. This stability is underpinned by an improved supply picture but tempered by softer demand.
Zoopla’s latest figures indicate a 9% year on year fall in buyer demand, reflecting a market in which purchasers are more selective and less pressured to move quickly. Increased stock levels carried over from late 2025 have improved buyer choice while reducing competitive tensions at the point of offer.
Mortgage Market
The disruption caused by the Iran conflict has had profound and immediate consequences for the UK mortgage market. The rapid escalation in geopolitical risk led to a surge in global energy prices, feeding directly into higher inflation expectations and triggering a sharp adjustment in wholesale funding markets.
Swap rates rose at their fastest pace since the mini Budget crisis of 2022, prompting one of the most dramatic rounds of mortgage repricing in over a decade. More than 500 mortgage products were withdrawn within 48 hours, an unprecedented single week contraction in available options, as lenders sought to reassess and reprice risk.
Notably:
• HSBC, Barclays, and other major lenders withdrew all sub 4% fixed rate products, effectively closing the window on the most competitive deals available only weeks earlier.
• Two and five year fixed rates have now returned above 5%, reversing much of the improvement seen through late 2025 and early 2026.
While analysts anticipate that this spike will ease once geopolitical tensions stabilise and energy markets cool, consensus suggests that mortgage rates are unlikely to return to their pre crisis lows in the near term. The mortgage market, already sensitive to inflation readings and monetary policy signals, is now navigating an environment where volatility is expected to remain elevated.
For prospective buyers, and particularly those on the margins of affordability, this has reintroduced hesitancy into the market and is expected to depress transaction levels through Q2.
Land Market Conditions
The land market continues to reflect a cautious and highly selective environment, shaped by both macroeconomic pressures and a tightening regulatory landscape.
Key dynamics include:
• Greenfield land values remain under pressure, especially in secondary locations.
• Strategic land, particularly in emerging ‘grey belt’ locations, remains a strong market, with interest underpinned by long term planning reform signals and the expectation of future housing supply requirements.
• Housebuilders remain risk averse, prioritising consented, well located, and infrastructure ready sites and avoiding those with uncertain planning trajectories or higher servicing costs and lower sales revenues.
A growing concern for land value is the cumulative impact of new regulatory costs, including the Future Homes Standard, the Building Safety Levy, and evolving design and environmental standards.
