UK Housing Market Outlook for 2026: First-Time Buyers to Drive Growth Amid Interest Rate Cuts
The 2026 UK housing market is expected to be driven primarily by first-time buyers, with house prices forecasted to grow between 2% and 4% as interest-rate cuts improve affordability. House prices rose by 1.8% in the year to November 2025, with the average price reaching £272,998 and inflation at 3.2%.
In London, prices are expected to remain flat in 2026, while prices in northern England are projected to rise, narrowing the traditional north–south divide. First-time buyers accounted for about one-third of purchases in 2025 and represented half of all deals in London. Typical first-time buyers, with a 20% deposit, paid 33% of their income on housing in 2025, down from 38% in 2023, with this ratio expected to fall further in 2026.
Mortgage rules have been relaxed to allow larger mortgages with smaller deposits of 10–15%, and the City watchdog aims to support first-time buyers and self-employed individuals. Rent growth is expected to slow, with projections of 2% to 3.5% growth in 2026, compared to a 5% increase to £1,360 for average private rents in the year to October 2025.
Stamp duty relief expired at the end of March 2025, and budget uncertainties in late 2025 dampened market activity. Current market conditions also feature a time-to-sell period around 200 days, compared to the usual 150 days. The economy remains lackluster, with unemployment at a four-year high of 5.1%.
