The UK economy expanded by 0.3% in March, despite the wider uncertainty caused by the ongoing unrest in the Middle East.
The Office for National Statistics (ONS) found that monthly gross domestic product (GDP) was up by 0.3% in March, following growth of 0.5% in February and no growth in January – both of which were revised down from rises of 0.6% and 0.1% respectively.
Services and construction output both grew by 0.3% and 1.5% respectively, though the ONS said they were partially offset by a 0.2% drop in production output.
Quarter-on-quarter, real GDP was up by 0.6%, following growth of 0.5% in the three months to February.
Uncertainty remains
The volatility of the situation in the Middle East had knock-on impacts for mortgage rates, with many products changing frequently or being completely withdrawn. Moneyfacts said that the average time a mortgage was available plummeted to eight days in March – a record low.
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Despite March’s GDP growth, Richard Pike, sales and marketing director at Phoebus Software, warned that continued political uncertainty could put pressure on mortgage rates.
He commented: “However you view the latest figures, the UK economy is near stagnant, with only modest growth since the start of the year, and uncertainty around interest rates and inflation levels [means] confidence is in short supply.
“That said, most mortgage businesses I speak to are still doing great volumes. This uncertainty, including political instability in Westminster, has sent bond yields surging to near 20-year highs this week and sent the pound and equity markets falling. This will put pressure on the cost of capital across the economy, including mortgage rates.”
Pike continued: “Although we have seen some product rate cuts recently, there’s a good chance that mortgage borrowing will become more expensive in the short term and put continued pressure on household finances. The country and the markets need the government and the Bank of England to do all it can to steady the ship, but how achievable that is with the current incumbent in No 10 remains to be seen.”
Pike’s sentiments were echoed by Colin Bradshaw, CEO of TwentyCi, who said: “A stronger-than-expected GDP performance reinforces the picture of a UK property market that has so far remained more resilient than many anticipated. Given the current global backdrop, including continued instability in the Middle East, many expected confidence across housing and mortgage markets to deteriorate more sharply. Instead, our data continues to show a market that is still growing compared with 2024, although momentum has moderated in recent weeks.
“There are still clear pressure points. Mortgage pricing volatility linked to higher swap rates has led to significant product repricing across the lending market, and many borrowers are once again facing fixed rates above 5%. Inflation risks are also reducing expectations of imminent interest rate cuts, keeping affordability under pressure.
“At the same time, households are absorbing higher fuel and energy costs, while buyer enquiries softened during March before showing more mixed trends in April. We are also starting to see activity cool slightly in London and the South East.
“However, the broader picture remains one of resilience. Buyers who are active in the market appear highly committed, and transaction volumes continue to hold up better than expected against a difficult economic backdrop. Our forecast remains 1.2 million transactions in 2026. While geopolitical risks remain elevated and conditions could shift quickly, the current evidence suggests the housing market is cooling gradually rather than entering a significant downturn.”