UK house prices could increase by up to 4% in 2026, with falling interest rates expected to ease affordability pressures for buyers, according to new forecasts from Nationwide.
The building society’s chief economist, Robert Gardner, said prices were likely to rise by between 2% and 4% next year as market conditions improve.
Gardner said: “The word that best describes the housing market in 2025 is ‘resilient’. Even though consumer sentiment was relatively subdued, with households reluctant to spend and mortgage rates around three times their post pandemic lows, mortgage approvals remained near pre-Covid levels.
“Stamp duty changes that took effect at the beginning of April created volatility through the spring and summer. Activity spiked in March as purchasers brought forward transactions to avoid paying additional tax, and this led to some softness in the following months. However, the underlying picture was little changed as demand held up well throughout.
“House prices evolved broadly in line with our expectations. Annual price growth slowed steadily from 4.7% at the end of 2024 to 2.1% in the middle of 2025 and then to 1.8% in November. As a result, prices were close to the all-time high recorded in the summer of 2022 as the year drew to a close.
“With price growth well below the rate of earnings growth and a steady decline in mortgage rates, affordability constraints eased somewhat, helping to underpin buyer demand. The first-time buyer share of house purchase activity was above the long run average, supported by easier credit availability, with the share of high loan to value lending (i.e. with a deposit of 15% or less) reaching its highest level for over a decade.
Nationwide also reported that the gap between house prices in the North and South of England narrowed during 2025, reflecting stronger price growth in more affordable regions.
However, rival lender Halifax is forecasting a more modest increase in house prices next year, predicting growth of between 1% and 3%. Halifax said the market would be supported in part by increased mortgage lending, a trend also highlighted by industry body UK Finance.
Mary-Lou Press, president of NAEA Propertymark, said: “Despite the challenges faced over the past year, the housing market has shown considerable robustness, even with borrowing costs remaining elevated and consumer confidence under pressure.
“Greater affordability, supported by stronger wage growth relative to house prices and improved access to higher loan-to-value lending, has played a crucial role in keeping buyers active, particularly those entering the market for the first time.
“As we look towards 2026, modest price growth appears achievable as affordability slowly improves. However, supporting a healthy housing market will require policies that strike the right balance for buyers, renters, and those providing much-needed homes.”
The forecasts come as new data shows first-time buyers are taking out larger mortgages than ever before. Rising wages, combined with looser affordability tests, have enabled buyers to stretch their budgets and access properties that were previously out of reach.
While lenders expect gradual improvement in market activity during 2026, affordability and borrowing levels are likely to remain under close scrutiny as the housing market adjusts to lower interest rates.
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