UK house prices ‘could rise by up to 4% in 2026 as interest rates fall’ | House prices
House prices in the UK could rise by up to 4% next year but getting on the property ladder could be a little easier, according to forecasts from lender Nationwide.
Prices are expected to rise between 2% and 4% next year, said Robert Gardner, the construction industry’s chief economist.
“We expect housing market activity to strengthen slightly as income growth outpaces house price growth and affordability gradually improves through a moderate decline in interest rates,” he said.
Separately, the City watchdog on Monday announced plans to help first-time buyers and self-employed people get on the property ladder.
Median house prices in the UK stood at £272,998 on average in November, according to Nationwide’s findings. A 4% increase next year could take the average to £283,918.
The Bank of England is expected to cut interest rates by a quarter of a point to 3.75% when it announces its final decision on Thursday.
Nationwide found that falling interest rates have helped support the property market this year, but annual house price growth has slowed steadily from 4.7% at the end of 2024 to 2.1% in mid-2025 and then to 1.8% in November.
Separate forecasts from property portal Rightmove also suggested house prices would rise by 2% in 2026.
Rightmove mortgage expert Matt Smith said house movers will be looking at cheaper average mortgage rates in 2026 compared to this year.
“Those who have seen house prices in their area slightly lower compared to last year and who may have had an increase in end-of-year wages will see their affordability improve even further,” he said.
“Many house movers will also see the amount they can borrow increase as lenders introduce regulator-permitted credit-to-income and stress ratio changes earlier this year.”
Mortgage lenders generally do not loan more than 4.5 times the borrower’s income. They also assess whether someone can afford repayment if interest rates rise, often in checks known as “stress tests.”
But earlier this year the Council’s watchdog, the Financial Conduct Authority, said the way some lenders carry out stress tests “may be unnecessarily restricting access to otherwise affordable mortgages”.
Many lenders have since lowered the interest rate they use to stress test borrowers.
Separately, FCA on Monday in question It will consult on reforms to the mortgage market, including simplifying mortgage rules to allow for more flexible products that reflect different working patterns and income levels at different stages of life.
It also hopes to improve advice for people to “plan with confidence for their next life” and promote the use of artificial intelligence to help brokers give “better and faster advice”.
With mortgage rates generally falling in the market, rules regarding stress tests are being relaxed. As of last weekend, the average two-year adjustment rate was 4.84% and the five-year adjustment rate was 4.91%, according to analyst Moneyfacts.
Rising fees and looser affordability tests have also led to first-time buyers taking out larger mortgages than ever before. The average first-time homebuyer borrowed a record £210,800 in the year to September, according to estate agent Savills.
Nationwide said the price gap between houses in the north and south of England was at its lowest level since 2013, with the latter being dragged down by “weak” growth in London.
The average price of a house in northern parts of England is now almost 58% of the price in southern areas, well above the 48% low in 2017, Nationwide said.
