UK House Prices Predicted to Rise up to 4% in 2026 as Interest Rates Decline

UK house prices are forecast to rise by as much as 4% in 2026, potentially pushing the average property value to approximately £283,918. Nationwide’s chief economist suggests that while the market is strengthening, affordability is gradually improving due to income growth outpacing price rises and a modest decline in interest rates. This positive outlook is echoed by other major industry players, with Rightmove predicting a 2% rise and Halifax forecasting growth between 1% and 3%. These increases are expected as lower borrowing costs and easing inflation counterbalance slowing wage growth and potential unemployment rises.
The mortgage landscape is shifting to support this growth, with the Bank of England widely expected to cut interest rates to 3.75%. Market data indicates that average fixed mortgage rates are already falling, with two-year fixes sitting around 4.84%. Simultaneously, the Financial Conduct Authority (FCA) has announced plans to assist first-time buyers and the self-employed by simplifying rules to allow for more flexible mortgage products. This follows observations that previous “stress tests” were unduly restricting access; lenders have since adjusted these tests, allowing first-time buyers to borrow record amounts, averaging £210,800 in the year to September. Additionally, regional disparities are shifting, with the price gap between northern and southern England narrowing to its lowest point since 2013.