Found out what the problem was.

At the end of apache2.conf was the following line.

# Include the virtual host configurations:
Include /etc/apache2/sites-enabled/[^.#]*

I then went to the file /etc/apache2/sites-enabled/000-default and
commented out the redirect line show below and now it's loading my
test index.html from /var/www.

<Directory /var/www/>
                Options Indexes FollowSymLinks MultiViews
                AllowOverride None
                Order allow,deny
                allow from all
                # This directive allows us to have apache2's default start page
                # in /apache2-default/, but still have / go to the right place
                RedirectMatch ^/$ /apache2-default/
        </Directory>
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