The first quarter of 2026 is now done – and what a quarter it’s been. At the beginning of the year, the housing market and the economy both looked in good shape for those looking to buy or sell. The autumn budget had been scrutinised, absorbed and at least brought a sense of certainty that had previously been lacking. Confidence and activity seemed positive, with Rightmove reporting the biggest jump in January prices on record and a 57% increase in buyer demand.
And then, at the end of February, the Iran war began.
Since then, the conflict in the Middle East has had a huge impact on everything from mortgage rates to energy bills, unsettling markets and consumer confidence. Meanwhile, on the lettings side, there are now just weeks until the biggest changes to the private rented sector in decades come into force.
The first phase of the Renters’ Rights Act will be implemented from May 1 and will scrap section 21 (so-called no-fault) evictions and end assured shorthold tenancies, which will automatically become periodic. This has had its own impact on rental confidence, with some landlords choosing to exit the market instead.
Inflation and interest rates
At the last meeting in March, the Bank of England’s Monetary Policy Committee unanimously voted to hold the UK base rate at 3.75% following a cut the previous month. The MPC warned that inflation, now at 3%, will rise as a result of increases to global energy prices, with inflation of 3.5% possible by the third quarter. The committee said it remains “ready to act as necessary” to ensure inflation remains on track to meet its 2% target.
The next MPC meeting is on April 30, a week after the latest inflation announcement. Few believe that interest rates will be increased so soon, but any further cut also looks unlikely. It looks like the 3.75% could be maintained once again.
Impact on mortgage rates and buyer confidence
The economic shocks caused by the Middle East conflict quickly fed through to mortgage rates, now back to above 5% compared to as low as 3.5% pre-conflict. In April, in its Financial Stability Report, the Bank of England warned that around 1.3 million more UK households are facing increased mortgage costs as a result.
Impact on employment
The latest update from the government on employment and the labour market is due April 21 and will take into account the more recent economic impacts, providing a clearer picture of the first-quarter impact. Currently, the latest figures – published in March - show that the UK unemployment rate increased by 0.1 percentage points between November 2025 and January 2026, while average earnings saw 3.8% annual growth over the same period.
House prices holding steady
Despite the geo-political turmoil, the latest figures for March illustrate a housing market that’s holding steady – for now at least. Average new seller asking prices rose by 0.8% in March to £371,042, according to Rightmove – although it warned that it was too early at the time of the publication of its figures to see the full impact. Nationwide, meanwhile, reported a 0.9% increase.
Looking ahead
The scarce figures available so far indicate a resilient start to the year, despite the challenges caused by the Middle East conflict. Buyers and sellers seem to be holding their nerve. The end-of-April updates will show a truer picture of the state of the market, but, for now at least, confidence – although dented – seems to be holding. It’s inevitable, however, that going forward, the uncertainty could prompt some to question their moves until global stability returns which will make expert agent advice more vital than ever.
If you are feeling uncertain about the right time to move, or are powering ahead regardless, we can help you with expert advice and guidance about the housing market here in London.
If you want to find out more about the opportunities that Canada Water and Marine Wharf offer, as well as discover more about how a 5-star rated multi-award-winning agency can help in your search for property in the area, we’d love to hear from you.
Contact us on 0207 231 0002, email us at welcome@living-london.net or get a free instant online valuation by clicking here.
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