British house prices rose unexpectedly in April, defying a backdrop of sliding consumer confidence and the economic shockwaves from the conflict in the Middle East. According to data published by Nationwide, the UK’s largest building society, the average home gained 0.4% in value last month – a result that caught economists off guard, with most forecasters having predicted a decline.
The annual rate of growth accelerated to 3.0% from 2.2% in March, the fastest pace since May 2025, pushing the average UK house price to £278,880. The figures come despite a marked deterioration in sentiment among households and businesses, and against the grain of rising mortgage rates triggered by the US‑Israeli war in Iran and the disruption of oil supplies through the Strait of Hormuz.
Why prices are climbing while confidence crumbles
Nationwide attributed the resilience to structural strength in household finances rather than any surge in demand. The building society pointed out that household debt levels are now at their lowest relative to income in roughly two decades, and that income growth has outpaced house price increases in recent years. These factors, it said, have helped to insulate the market from the immediate shock of weaker sentiment.
That sentiment is undeniably sour. GfK’s headline consumer confidence index dropped to −25 in April – its lowest since October 2023 – reflecting what the research firm described as households’ more pessimistic views of the economic outlook and their own financial positions. The Royal Institution of Chartered Surveyors also recorded a sharp fall in new buyer enquiries in March, with its index sliding to its weakest level since 2023, a development blamed on higher borrowing costs.
Mortgage rates have risen since the start of the conflict in the Middle East and are now at their highest levels since late 2024. The contrast with March data from rival lender Halifax, which reported a 0.5% fall in house prices, underscores the volatility of the current market. Nationwide’s chief economist, Robert Gardner, acknowledged the mixed signals: “Despite the uncertainty caused by developments in the Middle East and the subsequent rise in energy prices, the UK housing market has continued to regain momentum following the slowdown recorded around the turn of the year. This is somewhat surprising given that indicators of consumer confidence have weakened noticeably.”
Ashley Webb, senior UK economist at Capital Economics, cautioned that the upward momentum may prove fragile. “The surprisingly strong rise in the Nationwide measure of house prices in April shows that house prices have continued to gain momentum despite the falls in consumer confidence and the rise in mortgage rates since the start of the Iran war,” he said. “But the growing upside risks to our mortgage rate forecast from the most recent rise in oil prices suggests this strength is unlikely to last.”
NatWest delivers bumper profits as it braces for trouble
While the housing market confounded expectations, the banking sector offered a clearer sign of where the broader economy may be heading. NatWest Group reported first‑quarter profits of £1.4bn – a figure that beat analyst forecasts. Pretax operating profit came in at £2.03bn against an estimate of £1.92bn, while net income reached £1.43bn, ahead of the £1.32bn analysts had pencilled in. The bank’s return on tangible equity hit 18.2%, above the estimated 17.3%.
The strong performance was driven by all three of the group’s divisions. Commercial & Institutional operations contributed £1.03bn to operating profit, Retail Banking added £781m, and Private Banking chipped in £94m. Chief executive Paul Thwaite credited “healthy customer activity” and the increased use of artificial intelligence across the bank, saying it had been “a strong performance in the first quarter of 2026”.
Yet behind the upbeat numbers, NatWest is preparing for a downturn. The bank set aside an additional £140m to cover potential loan losses in case the economy worsens. It expects full‑year income to land at the top end of its guidance range of £17.2bn to £17.6bn – an outlook that depends on the trajectory of interest rates and the health of borrowers as inflation and energy costs rise.
Economic data: inflation, growth and the Bank of England’s dilemma
The contradictions in the housing and banking figures can only be understood against the wider economic picture, which is increasingly dominated by the fallout from the Middle East conflict. Brent crude surged past $120 a barrel after Iran closed the Strait of Hormuz on 4 March, prompting the International Energy Agency to call it “the largest supply disruption in the history of the global oil market”. The resulting energy price shock is already feeding through to UK inflation. The Consumer Prices Index rose to 3.3% in March, up from 3.0% in February, with motor fuel the single biggest contributor. Food price inflation also ticked up to 3.7%.
The Bank of England has warned that “higher inflation is unavoidable” and has laid out scenarios in which it could rise significantly further. At its April meeting, the Monetary Policy Committee voted 8‑1 to keep the Bank Rate at 3.75%. The sole dissenter was chief economist Huw Pill, who voted to raise it to 4%, citing the risk of persistent “second‑round effects” on wages and prices from higher energy costs. The Bank acknowledges that monetary policy cannot undo the real adjustment required by an energy price shock, but it remains focused on returning inflation to the 2% target.
The economic forecasts are darkening. The Treasury’s April 2026 survey of independent forecasters showed average GDP growth of just 0.6% for the year, down from 0.9% in March. The International Monetary Fund also cut its UK growth forecast, to 0.8% – the sharpest downward revision of any G7 economy – because, the IMF assessed, “the UK is more exposed to energy price shocks than [its] counterparts”. Some analysts warn that a prolonged conflict could tip the UK into recession in the second half of the year, with inflation reaching around 5% and unemployment rising to 5.8%.
Business confidence remains near historic lows. The Institute of Directors’ Directors’ Economic Confidence Index nudged up from −76 to −64 in April but is still deep in negative territory. Companies are increasingly worried about shortages: around a third of manufacturers, wholesalers, retailers and construction firms report that they have already experienced supply difficulties. Mortgage approvals, a forward‑looking indicator for the housing market, fell to 60,000 in January – the lowest since January 2024 – though leading indicators suggested some recovery into February before the geopolitical situation worsened.
Friday’s data calendar includes the release of Bank of England consumer credit and mortgage approvals figures for March at 9:30am, followed by a speech from chief economist Huw Pill at 1:15pm. The consumer credit data for February showed net borrowing rising to £1.9bn, the highest since November 2025, while mortgage approvals stood at 62,580 in the previous month’s comparison. Pill’s remarks will be closely watched for any shift in his views on the need for further rate increases as the economic headwinds intensify.
