21 godzin temu
UK house prices are set to rise by up to 4% in 2026 as affordability improves and mortgage rates fall, according to major property lenders. Nationwide forecasts annual growth between 2% and 4%, while Rightmove predicts a 2% increase, driven by lower borrowing costs and income growth outpacing price rises.
The optimistic outlook comes despite average asking prices dropping £6,695 in November to £358,138. The Bank of England is expected to cut its key interest rate from 4% to 3.75% as early as this Thursday, which could further boost buyer confidence heading into the new year.
Market rebound expected after Budget uncertainty
The housing market experienced two distinct phases in 2025. Activity remained strong in the first half, but the second half saw a slowdown as buyers and sellers paused plans amid uncertainty over November's Budget and rumors of property tax changes circulating since August.
Rightmove's Colleen Babcock said: «Lower price growth supported buyer affordability and drove activity in the first half of the year, even after the April stamp duty deadline in England. In the second half of 2025, uncertainty caused by rumours of property tax changes in November's Budget swirled, some from as early as August.»
The market is now poised for a traditional post-Christmas boost. Babcock noted: «The market will soon benefit from the traditional boost in home-moving activity from Boxing Day.» Nearly a fifth of potential home movers surveyed by Rightmove indicated they were waiting for the Budget outcome before resuming their plans.
Lower rates driving improved affordability
Nationwide's chief economist Robert Gardner explained: «Looking ahead, we expect housing market activity to strengthen a little further as affordability improves gradually (as it has been in recent quarters) via income growth outpacing house price growth and a further modest decline in interest rates. We expect annual house price growth to remain broadly in the 2 to 4% range next year.»
He added: «The next decline in interest rates could come as early as this Thursday, when the Bank of England is generally expected to lower its key interest rate from 4% to 3.75%.»
Rightmove's mortgage expert Matt Smith said: «Home movers will be entering 2026 looking at cheaper average mortgage rates than they were at the beginning of 2025, helping affordability.» Many borrowers will also benefit from increased loan-to-income ratios introduced by lenders following regulatory changes earlier this year.
Regional variations and buyer trends
The North-South house price divide has narrowed to its lowest point since 2013. London saw the weakest annual growth at 1.3% in the first nine months of the year, while the North West led with 2.6% growth. The South West and South East both recorded declines of 2.7%.
First-time buyers hit record levels, borrowing an average of £210,800 in the year to September and now accounting for 20% of UK housing market spending—the highest share since at least 2007. This surge reflects both rising wages and looser affordability tests implemented by lenders.
Looking ahead
Property experts emphasize that sellers must remain realistic to attract buyers in a market with high choice. New property taxes announced in the Budget are unlikely to significantly impact 2026, as the high-value council tax surcharge won't take effect until April 2028 and will apply to less than 1% of properties in England.
However, increased taxes on landlords could dampen buy-to-let activity and reduce rental property supply, potentially maintaining upward pressure on rents.
Note: This article was created with Artificial Intelligence (AI).
