UK housing prices are expected to increase between 2% and 4% next year, according to forecasts from lender Nationwide. Robert Gardner, the building society’s chief economist, stated that the housing market activity is likely to strengthen further as affordability gradually improves through income growth outpacing house price growth and a modest decline in interest rates.
The average UK house price stood at £272,998 in November. A 4% rise next year would push the average to £283,918. The Bank of England is widely anticipated to cut interest rates by a quarter of a percentage point to 3.75% this Thursday.
Falling interest rates have helped support the property market this year, although annual house price growth has slowed from 4.7% at the end of 2024 to 1.8% in November. Forecasts from Rightmove also suggest house prices will rise by around 2% in 2026, while Halifax has predicted a 1% to 3% increase next year as lower interest rates and easing inflation are expected to outweigh the impact of slowing wage growth and a possible rise in unemployment.
Matt Smith, a mortgage expert at the property portal, said home movers are likely to face cheaper average mortgage rates at the start of the year compared to 2025. “Those who are seeing slightly lower house prices in their area compared to last year, and may have also had an end-of-year pay rise, will see their affordability improved further,” he added.
The City watchdog, the Financial Conduct Authority (FCA), has announced plans to help first-time buyers and self-employed individuals get on the property ladder. The regulator will consult on changes to the mortgage market, including simplifying rules to allow more flexible products that better reflect different working patterns and income levels at various stages of life.
The FCA also aims to improve advice to help people “confidently plan for later life” and encourage the use of AI to help brokers provide “better and faster advice”. Mortgage rates are broadly falling across the market, with the average two-year fixed rate at 4.84% and the average five-year fix at 4.91% on Monday, according to Moneyfacts.
The price gap between homes in the north and south of England has narrowed to its lowest since 2013, largely due to weak growth in London. The average price of a home in northern England is now almost 58% of that in the south, up from a low of around 48% recorded in 2017, Nationwide said.