UK home costs might improve by as much as 4% in 2026, with falling rates of interest anticipated to ease affordability pressures for consumers, in accordance with new forecasts from Nationwide.
The constructing society’s chief economist, Robert Gardner, stated costs had been prone to rise by between 2% and 4% subsequent yr as market circumstances enhance.
Gardner stated: “The phrase that finest describes the housing market in 2025 is ‘resilient’. Though client sentiment was comparatively subdued, with households reluctant to spend and mortgage charges round thrice their submit pandemic lows, mortgage approvals remained close to pre-Covid ranges.
“Stamp obligation modifications that took impact in the beginning of April created volatility by means of the spring and summer time. Exercise spiked in March as purchasers introduced ahead transactions to keep away from paying extra tax, and this led to some softness within the following months. Nevertheless, the underlying image was little modified as demand held up effectively all through.
“Home costs developed broadly according to our expectations. Annual worth development slowed steadily from 4.7% on the finish of 2024 to 2.1% in the course of 2025 after which to 1.8% in November. Because of this, costs had been near the all-time excessive recorded in the summertime of 2022 because the yr drew to an in depth.
“With worth development effectively beneath the speed of earnings development and a gentle decline in mortgage charges, affordability constraints eased considerably, serving to to underpin purchaser demand. The primary-time purchaser share of home buy exercise was above the long term common, supported by simpler credit score availability, with the share of excessive mortgage to worth lending (i.e. with a deposit of 15% or much less) reaching its highest degree for over a decade.
Nationwide additionally reported that the hole between home costs within the North and South of England narrowed throughout 2025, reflecting stronger worth development in additional inexpensive areas.
Nevertheless, rival lender Halifax is forecasting a extra modest improve in home costs subsequent yr, predicting development of between 1% and three%. Halifax stated the market can be supported partly by elevated mortgage lending, a pattern additionally highlighted by business physique UK Finance.
Mary-Lou Press, president of NAEA Propertymark, stated: “Regardless of the challenges confronted over the previous yr, the housing market has proven appreciable robustness, even with borrowing prices remaining elevated and client confidence below strain.
“Larger affordability, supported by stronger wage development relative to accommodate costs and improved entry to larger loan-to-value lending, has performed an important position in holding consumers energetic, notably these coming into the marketplace for the primary time.
“As we glance in the direction of 2026, modest worth development seems achievable as affordability slowly improves. Nevertheless, supporting a wholesome housing market would require insurance policies that strike the appropriate steadiness for consumers, renters, and people offering much-needed properties.”
The forecasts come as new information reveals first-time consumers are taking out bigger mortgages than ever earlier than. Rising wages, mixed with looser affordability checks, have enabled consumers to stretch their budgets and entry properties that had been beforehand out of attain.
Whereas lenders anticipate gradual enchancment in market exercise throughout 2026, affordability and borrowing ranges are prone to stay below shut scrutiny because the housing market adjusts to decrease rates of interest.
Property business reacts to new Rightmove Home Worth Index
