UK housing market: 2026 could be a good year to buy

But I’m not expecting a house price boom or a glut of mortgage rates which were seen only a few years ago – the world has significantly moved on since the start of this decade.

Overall, I expect 2026 to see modest growth in house prices of around three to five percent.

That will naturally cover significant regional variances, with some areas in the north of England, Scotland and Wales seeing larger price increases than London and the South, simply due to affordability and supply pressures.

And we will be seeing an increase in house sales compared to the current situation which has been pretty stagnant.

There are some changes in the markets which might boost sales, such as housing reform policies.

And I predict that mortgages will become more affordable as mortgage rates continue to ease and we see modest growth in incomes.

The main driver of this will be lenders coming to the market with better products which are more affordable and boost the number of potential buyers in the market.

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Rates are expected to fall gradually, but not too dramatically. Inflation is still above the Bank of England’s target of two per cent and the base rate decided by the Bank is one of their key levers to influence that number.

But don’t expect rates to fall to anything like they were a few years ago, particularly during Covid, when we were seeing rates of 0.1 per cent – that was an unprecedented situation. But I do think they’ll be consistently staying around the three per cent level than the four per cent level we’ve seen in the recent past.

Those are the mortgage deals you need to be going for because don’t forget, those historic lows are way out of the range where, historically, mortgage rates have been. If you look back at history, they used to be 12 or 13 per cent so if you’re getting a rate of three per cent – wrap your arms around it.

The base rate is just that, the base rate at which the Bank of England lends. The prices offered to consumers vary and might be higher because you’re purchasing a financial product from a commercial company.

The latest drop has been predicted by the markets, so don’t feel frustrated if you’ve recently secured a mortgage and feel like you signed on the dotted line too soon: lenders have been pricing these anticipated drops and pricing them into their mortgages.

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The trick is to look at the longer run anticipated trend and not worry too much about the news. Lenders have been setting their interest rates where borrowers can already get a better deal.

The base rate is really just a gage. Obviously, if the rates are reduced, the lenders might reduce theirs a little further.

What to watch out for in 2026

Don’t expect a bargain

Buyers shouldn’t be expecting huge bargains in the new year, simply because houses aren’t being built quickly enough for supply to match demand. With more people trying to buy houses, this will push up prices.

But sellers need to be realistic as well. Moderate growth means you should expect houses to be on the market for longer, and that means potential price adjustments. The longer a house sits on the market it is harder to find a buyer without reducing the price.

Look outside London and the South

For first time buyers and investors, my recommendation would be to look at regional markets and underperforming areas for greater affordability and potential growth.

Areas including the North East, North West and Yorkshire saw the highest number of new homes being registered whereas London actually saw a decrease.

Watch for changes in regulation

Changes in the regulation of financial products, such as lending criteria or deposit requirements, could influence changes in demand and therefore on prices.

We’ve already seen movement in a positive direction this year with lenders looking at 100% loan to value mortgages and deposit schemes for as little as £5000 or even £3000.

These are all schemes designed to stimulate the housing market and especially to help those first time buyers who are in rented accommodation onto the property ladder.

But because there are more people who will have access to mortgages without the same increase in the number of properties, this could push the price up.

Watch for new products coming to the market

I think there will be an increase in products coming to the market by the big five lenders. I expect Lloyd’s banking group, for example, to be the first to the market with 100 per cent mortgage lending.

I also expect technology to drive faster underwriting and make mortgages more accessible to first time buyers.

But I don’t expect these changes to be enough to impact the driving factor in house prices which is supply and demand.
New builds will be easier to buy

Older homes tend to hold their value and grow, simply because they can’t be replicated. So if you are looking for a house which is more structurally sound, has brick walls internally rather than just externally as well as that character which many buyers want, then you’re going to find it tougher.

If you are trying to buy for investment purposes and in particular trying to find a below market value or buy a property to refurbish, you are going to find it even more difficult.

First time buyers should look at those new builds, particularly ones with a good stamp duty and/or deposit offer. It’s better to get on the property ladder and start owning a property which will grow in value than wait in vain for that affordable ‘dream home’.