UK House Prices Could Rise by Up to 4% in 2026
UK house prices could rise by up to 4% in 2026 as interest rates fall, according to new forecasts, while regulatory changes may make it easier for first-time buyers and the self-employed to get on the property ladder.
Nationwide has said UK house prices are likely to increase by between 2% and 4% next year. The lender’s chief economist, Robert Gardner, noted that housing market activity is expected to strengthen modestly as affordability improves, driven by income growth outpacing house price rises and a further, gradual decline in interest rates. Alongside these forecasts, the City watchdog has announced new plans aimed at supporting first-time buyers and self-employed workers. On Monday, the Financial Conduct Authority (FCA) outlined proposals designed to make mortgage rules more flexible and better suited to different working patterns and income levels across various life stages.
The average UK house price stood at £272,998 in November, according to Nationwide. A 4% increase in 2026 would take this figure to around £283,918. The Bank of England is widely expected to cut interest rates by a quarter of a percentage point to 3.75%, a move that could further support the housing market. Nationwide said falling interest rates have already helped underpin the property market this year. However, annual house price growth slowed from 4.7% at the end of 2024 to 2.1% by mid-2025, before easing to 1.8% in November.
Other forecasts point to more modest growth. Rightmove expects house prices to rise by around 2% in 2026, while Halifax has predicted increases of between 1% and 3%. Halifax said lower interest rates and easing inflation are likely to outweigh the effects of slowing wage growth and a potential rise in unemployment. A mortgage expert at Rightmove, said many home movers are likely to start the year with cheaper average mortgage rates than in 2025. He added that buyers benefiting from slightly lower local house prices and recent pay rises should see further improvements in affordability. In addition, the amount buyers can borrow has increased as lenders roll out changes to loan-to-income limits and stress-testing rules approved by regulators earlier this year.
Falling interest rates and proposed FCA mortgage reforms may ease affordability pressures for first-time buyers and home movers.
Traditionally, mortgage lenders cap borrowing at around 4.5 times income and assess whether borrowers could afford repayments if interest rates were to rise, using so-called stress tests. However, the FCA has said some of these tests may have been “unduly restricting access to otherwise affordable mortgages,” prompting many lenders to reduce the interest rates used in their assessments.
The FCA has also confirmed it will consult on broader changes to the mortgage market, including simplifying rules to encourage more flexible mortgage products. The regulator also plans to improve financial advice to help people plan for later life and to encourage the use of artificial intelligence to enable brokers to provide faster and more effective advice.
Mortgage rates continue to edge down across the market. According to Moneyfacts, the average two-year fixed mortgage rate stood at 4.84% on Monday, while the average five-year fixed rate was 4.91%. Rising wages and looser affordability checks have allowed first-time buyers to take out larger mortgages than ever before. Savills reported that the average first-time buyer borrowed £210,800 in the year to September, the highest level on record.
Nationwide also noted a narrowing gap between house prices in the north and south of England, now at its smallest level since 2013. This trend has been driven largely by weak price growth in London. The average home in northern England is now priced at nearly 58% of the average in the south, well above the low of around 48% recorded in 2017.
Disclaimer: The views expressed above are based on industry reports and related news stories and are for informational purposes only . SSIL does not guarantee the accuracy, legality, completeness, reliability of the information and or for that of subsequent links and shall not be held responsible for any action taken based on the published information.