First-time Buyers to Drive UK Housing Market in 2026 Amid Interest Rate Cuts
In 2026, first-time buyers are expected to be the main drivers of the UK housing market as recent interest rate cuts improve affordability. Analysts forecast that for-sale prices will rise by 2% to 4% over the year. Rent growth is also predicted to slow, with increases of between 2% and 3.5%.
Data from Nationwide shows the average UK home value at £272,998, with prices having increased by 1.8% in the year to November 2025. The total price growth for 2025 is estimated at 1% to 2%, which remains below the inflation rate of 3.2%. The Bank of England cut interest rates just before Christmas, and economists expect two more cuts in 2026. Fixed-rate mortgage deals have fallen under 4%, with Santander offering a two-year fix at 3.55% requiring a 40% deposit.
Regionally, London house prices fell in 2025 but are expected to remain flat through 2026, while prices in the north of England are rising. This shift has narrowed the north-south price divide to its smallest since 2013. First-time buyers made up about one-third of housing purchases in 2025, accounting for half of all deals in London.
Despite these positive drivers, the market remains slow, with the average listing-to-exchange time exceeding 200 days. Additionally, unemployment has reached a four-year high of 5.1%, which may temper housing demand.
