Research shows that the UK housing market is set for a steadier, more optimistic year in 2026. After a period of uncertainty and slower activity at the end of 2025, confidence is returning, affordability is improving, and more buyers and sellers are preparing to make their move.
A Modest Rise in House Prices
Current market analysis suggests that average new seller asking prices are likely to increase by around 2% by the end of 2026. This gentle rise reflects a market that is gradually finding its footing rather than experiencing rapid growth.
Lower‑priced regions — particularly Scotland, Wales and the North of England — are expected to see stronger momentum, while higher‑value areas such as London may experience more subdued growth.
Affordability Improving for Buyers
Research indicates that 2026 could be a more favourable year for first‑time buyers. Several factors are working in their favour:
- A wider choice of homes coming onto the market
- Wage growth outpacing house price increases
- Mortgage rates easing compared with recent years
- Lenders exploring ways to responsibly increase borrowing limits
These shifts mean buyers may find it easier to secure a property, negotiate on price and manage monthly repayments. However, many will still rely on family support for deposits, and mortgage rates remain higher than they were in the early 2020s.
Post‑Budget Confidence Returning
A significant number of potential movers paused their plans ahead of the Autumn Budget, waiting to see how tax changes might affect them. With that uncertainty now resolved, many are expected to resume their search from late December into the new year, helping to boost early‑2026 activity.
Economic Factors Shaping the Market
Interest Rates
Forecasts suggest further reductions to the Bank of England’s Base Rate in 2026, which should help mortgage rates continue to edge down — particularly for two‑year fixed deals.
Inflation
With inflation stabilising, the cost of living and building materials is becoming more predictable. This supports steady, sustainable house price growth rather than sharp fluctuations.
Wage Growth
Incomes are expected to rise faster than property prices, gradually improving the balance between earnings and housing costs.
Policy Changes Influencing Behaviour
Several tax changes announced in the Budget will shape the market over the coming years:
- A mansion tax on homes valued above £2 million, due in 2028
- A 2% increase in income tax on rental income for landlords from 2027
Although these changes don’t take effect in 2026, they are already influencing buyer and seller decisions — particularly at the top end of the market, where activity is expected to slow.
Regional Predictions for 2026
Research points to clear regional differences in performance:
| Region | Predicted Growth |
|---|---|
| UK (overall) | +2% |
| Scotland | +3% |
| Wales | +3% |
| London | +1% |
More affordable regions with healthier supply‑and‑demand balance are expected to outperform wealthier southern areas.
What This Means for First‑Time Buyers
First‑time buyers are likely to be among the biggest beneficiaries of 2026’s market conditions. With more homes available and improved affordability, they’ll have greater negotiating power and more realistic borrowing options.
Who May Face Challenges?
The top end of the market is expected to be the most affected. With the upcoming mansion tax on the horizon, some sellers may reduce asking prices to stay below key thresholds, and buyers may be more cautious about high‑value purchases.
Mortgage Rates in 2026
Market expectations suggest at least one mortgage rate cut in 2026, with the possibility of a second later in the year. Two‑year fixed rates are likely to see the most movement, and the gap between two‑ and five‑year deals is expected to widen.
Planning Your Move in 2026
For sellers, realistic pricing will be essential as buyers have more choice. For buyers, improved affordability and a wider selection of homes make 2026 a promising year to take the next step.