Introduction: UK house prices rise again in March
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Nationwide, the building society, is kicking the day off by reporting that UK house prices have risen by 0.9% in March compared with the prior month, and by 2.2% on an annual basis.
Robert Gardner, the chief economist at the lender, says that the pick up in growth suggests the market has regained momentum after a slow end to 2025. But this could be the calm before the storm, he says:
The sharp rise in global energy prices in response to developments in the Middle East represents a significant shock to the global economy, clouding the outlook.
In the near term, UK economic growth is likely to be slower and inflation higher than previously expected, although ultimately the impact will depend on the duration of the shock as well as the policy response. The outlook for interest rates is particularly uncertain and dependent on whether the demand or supply side of the economy is more adversely affected.
In the first quarter of the year, the average price of a house in the UK was £274,930, up 1.5% compared with same period in 2025.
Gardner adds that interest rates have changed dramatically since the start of the conflict in the Middle East.
Towards the end of March, three interest rate increases were priced in over the next twelve months, compared to two rate cuts being anticipated before the strikes on Iran. This shift has resulted in a sharp rise in longer term interest rates (swap rates) that underpin fixed rate mortgage pricing.
If sustained, this could reverse some of the improvement in housing affordability that has taken place in recent years. With consumer sentiment also likely to be dented by the uncertain outlook and the prospect of rising energy costs, housing market activity is likely to soften.
Tom Bill, head of UK residential research at the estate agent Knight Frank, adds that the fact mortgage offers last for six months means the effect of higher borrowing costs will filter into the market this spring and summer, which could put “downward pressure on prices and transaction volumes”.
The longer-term impact hinges on the intensity and length of the conflict. That said, one mitigating factor is the amount of equity in the system and the fact more homes are now owned outright than with a mortgage.”
Elsewhere this morning, official stats confirm that the UK economy barely grew at the end of last year.
The Office for National Statistics confirmed that gross domestic product grew by just 0.1% in the October to December quarter. That followed growth of 0.1% in the preceding three months too.
However, the ONS did revise annual growth for the whole of 2025 up slightly, from 1.3% to 1.4%.
The figures for the final quarter are not very inspiring, but the Treasury has put out this statement:
In an uncertain world we have the right economic plan. The decisions we have taken have put us in a better position to protect the country’s finances and family finances from global instability.
We were the fastest growing European economy in the G7 last year and now we’re going even further by using regional growth, AI and a closer relationship with the EU to get our economy growing.”
Thomas Pugh, chief economist at the audit, tax and consulting firm RSM UK, takes a more critical stance:
GDP growth for Q4 was unchanged at 0.1% q/q, suggesting that the economy entered the current crisis with very little momentum, even though growth in 2025 as a whole was revised up slightly.
Of course, backward looking is an understatement for Q4 data, the outlook for growth is now materially weaker for this year and 2027 as higher energy prices will squeeze real incomes and further weigh on an already weak employment market.
The agenda
Key events
Unilever nears £11.9bn deal to merge food business with McCormick
Unilever, the consumer goods group behind Hellmann’s mayonnaise and Horlicks, has said it is in late stage talks to merge its food business with its US rival, McCormick.
The FTSE 100 company said in a statement this morning that it was in “advanced discussions” with McCormick, which makes Cholula hot sauce and French’s mustard, as well as other spices and seasoning brands.
A deal is expected to involve combining Unilever’s food business with McCormick for about $15.7bn (£11.9bn) of cash upfront, as well as equity in McCormick. It means Unilever and its investors would own 65% of the combined company once the deal is complete.
Unilever said that the deal could be reached today but there was “no certainty that a transaction will be agreed”.
Nevertheless, its shares have ticked up 0.9% this morning, and McCormick is up 2.3% in pre-market trading in the US.
The company released the statement after a story by The Wall Street Journal, which reported that the deal would create a new food business worth roughly $60bn, including debt.
Last year Unilever spun off its ice cream business to create the Magnum Ice Cream Company, which it floated with a primary listing in Amsterdam and secondary listings in New York and UK.
UK grocery inflation at 4.3% in March
People are facing a jump in a raft of household bills next month – and food prices are rising too, according to the researcher Worldpanel by Numerator.
It found that UK grocery inflation came in at 4.3% in the four weeks to March 22. Prices are rising fastest in markets such as fresh unprocessed meat, skin care and chocolate confectionery, it said, and falling fastest in chilled butter and spreads, household paper and sugar confectionery.
Fraser McKevitt, head of retail and consumer insight at Worldpanel by Numerator, says conflict in the Middle East is likely to drive up price rises even further:
Financial anxiety among British consumers was already running high before the conflict began. And with grocery inflation likely to increase and fuel costs rising sharply, the conditions that make shoppers feel vulnerable are only intensifying.
Fast rises in chocolate prices will be unwelcome news for those looking to pick up an Easter egg this week – which now costs an average of £3.27, up 9% compared with last year, Worldpanel found.
It has also been a good month for Waitrose in particular – sales grew 5.6%, its fastest rate in five years. Its market share increased to 4.7%, up from 4.6% last year and its highest level in three years. Ocado was the fastest growing grocer again, with sales up 12.3%, although it only accounts for 2.2% of the market. Tesco has retained the biggest market share, at 28%.
European markets are subdued this morning: the UK’s FTSE 100 is pretty flat rising only slightly by 0.1%. France’s Cac 40 and Germany’s Dax are also both up by 0.1%. The Italian FTSE MIB is down 0.3%.
Oil prices are edging higher, with the international benchmark Brent crude rising by 0.6% to $113.43 a barrel.
Lenders shares rise after car finance scandal compensation scheme announced
Shares in lenders involved in the car finance scandal are rising this morning, after the City regulator released the final details of its plans for a compensation scheme last night.
Lloyds Banking Group is up 0.5% in early trading. Barclays is up 0.7%, and the specialist lender Close Brothers is up 0.8%. Santander, which is listed in Spain, is also up 0.8%.
The Financial Conduct Authority announced details last night for its redress programme for victims of the car finance scandal, who were overcharged for loans as a result of commission payments between lenders and car dealers.
It has narrowed down the number of loan agreements eligible for payouts from 14m to 12.1m contracts – however that tweak, which covers loans agreed between 2007 and 2024, is expected to result in a higher payout for each contract, up from £700 to £830, including interest.
Turning back to house prices: most regions in the UK grew in the first quarter of the year, apart from outer South East (down 0.7% year-on-year) and East Anglia (down 0.4%), according to Nationwide.
But on the other side of the spectrum, Northern Ireland has continued to outperform, with house prices up 9.5% year-on-year in the first quarter – more than six times the rate recorded by the UK as a whole.
Robert Gardner, chief economist at the lender, adds:
England saw a further slowing in annual house price growth to 0.9%, from 1.2% in Q4. Average prices in Northern England (comprising North, North West, Yorkshire & The Humber, East Midlands and West Midlands) were up 1.5% year on year, with the North West (which includes areas such as Cheshire, Lancashire & Greater Manchester) remaining the top performing region in England – with prices up 3.3% year on year.
By property type, detached properties performed the strongest, with prices up 2.4% year-on-year over the last 12 months. Terraced properties grew by 2.1%, with semi-detached slightly weaker at 1.5%. Flats fell by 0.5%.
Confirmation that the UK “limped over the line” at the end of 2025 will not be a surprise to many, says Jonathan Raymond investment manager at Quilter Cheviot, but it shows just how exposed the economy was entering 2026.
Growth was already fragile, and while there were tentative signs of life at the start of the year, the latest bout of geopolitical turmoil has quickly snuffed them out.
The UK has narrowly avoided the recession some feared would have arrived at some point in the past 18 months, but that should not be mistaken for strength. This is an economy stuck in stagnation.
After a promising start to the year, momentum faded as businesses paused investment in response to tax changes and households grew increasingly cautious about what comes next. Inflation, meanwhile, has remained stubbornly above target, keeping interest rates higher for longer and tightening the squeeze on activity.
Inflation held steady at 3% in February, which was in line with expectations but still well above the government’s 2% target.
Looking ahead, higher energy prices are beginning to impact economic activity, raising the risk of softer demand as consumers and households retrench just as inflationary pressures re‑emerge.
…For the Bank of England, this presents an uncomfortable trade‑off. In normal circumstances, prolonged stagnation would argue for looser policy to support growth. But with inflation likely to rise again, the scope to cut rates is limited.
Markets may be overestimating how far policy needs to tighten with expectations for at least 2 quarter-point interest rate rises this year, but the Bank will have to remain agile in responding to this energy shock if it is to prevent today’s weakness from hardening into something more lasting.”
Introduction: UK house prices rise again in March
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Nationwide, the building society, is kicking the day off by reporting that UK house prices have risen by 0.9% in March compared with the prior month, and by 2.2% on an annual basis.
Robert Gardner, the chief economist at the lender, says that the pick up in growth suggests the market has regained momentum after a slow end to 2025. But this could be the calm before the storm, he says:
The sharp rise in global energy prices in response to developments in the Middle East represents a significant shock to the global economy, clouding the outlook.
In the near term, UK economic growth is likely to be slower and inflation higher than previously expected, although ultimately the impact will depend on the duration of the shock as well as the policy response. The outlook for interest rates is particularly uncertain and dependent on whether the demand or supply side of the economy is more adversely affected.
In the first quarter of the year, the average price of a house in the UK was £274,930, up 1.5% compared with same period in 2025.
Gardner adds that interest rates have changed dramatically since the start of the conflict in the Middle East.
Towards the end of March, three interest rate increases were priced in over the next twelve months, compared to two rate cuts being anticipated before the strikes on Iran. This shift has resulted in a sharp rise in longer term interest rates (swap rates) that underpin fixed rate mortgage pricing.
If sustained, this could reverse some of the improvement in housing affordability that has taken place in recent years. With consumer sentiment also likely to be dented by the uncertain outlook and the prospect of rising energy costs, housing market activity is likely to soften.
Tom Bill, head of UK residential research at the estate agent Knight Frank, adds that the fact mortgage offers last for six months means the effect of higher borrowing costs will filter into the market this spring and summer, which could put “downward pressure on prices and transaction volumes”.
The longer-term impact hinges on the intensity and length of the conflict. That said, one mitigating factor is the amount of equity in the system and the fact more homes are now owned outright than with a mortgage.”
Elsewhere this morning, official stats confirm that the UK economy barely grew at the end of last year.
The Office for National Statistics confirmed that gross domestic product grew by just 0.1% in the October to December quarter. That followed growth of 0.1% in the preceding three months too.
However, the ONS did revise annual growth for the whole of 2025 up slightly, from 1.3% to 1.4%.
The figures for the final quarter are not very inspiring, but the Treasury has put out this statement:
In an uncertain world we have the right economic plan. The decisions we have taken have put us in a better position to protect the country’s finances and family finances from global instability.
We were the fastest growing European economy in the G7 last year and now we’re going even further by using regional growth, AI and a closer relationship with the EU to get our economy growing.”
Thomas Pugh, chief economist at the audit, tax and consulting firm RSM UK, takes a more critical stance:
GDP growth for Q4 was unchanged at 0.1% q/q, suggesting that the economy entered the current crisis with very little momentum, even though growth in 2025 as a whole was revised up slightly.
Of course, backward looking is an understatement for Q4 data, the outlook for growth is now materially weaker for this year and 2027 as higher energy prices will squeeze real incomes and further weigh on an already weak employment market.
