UK (Parliament Politics Magazine) – Nationwide forecasts UK house prices could rise 2-4% in 2026 as falling rates, rising wages, and improving affordability support buyers.
As reported by Lauren Almeida of The Guardian, UK house prices may rise by 4% next year, offering improved opportunities for those aiming to get on the property ladder, Nationwide predicts.
What did Nationwide report about UK house prices and the market outlook for 2026?
Lender Nationwide forecasts that UK house prices may climb by as much as 4% in 2026, making it slightly easier for first-time buyers to enter the property market.
In its 2026 housing outlook, Nationwide’s chief economist Robert Gardner said that lower borrowing costs may support the market over the coming year, saying,
“Looking ahead, we expect housing market activity to strengthen a little further as affordability improves gradually (as it has been in recent quarters) via income growth outpacing house price growth and a further modest decline in interest rates. We expect annual house price growth to remain broadly in the 2 to 4% range next year.”
Mr Gardner said Chancellor Rachel Reeves’s new taxes targeting the high end of the property market are unlikely to affect prices significantly in 2026. Still, new charges on landlords could increase the cost of renting.
He stated,
“The changes to property taxes announced in the Budget are unlikely to have a significant impact on the market. The high value council tax surcharge is not being introduced until April 2028 and will apply to less than 1% of properties in England and around 3% in London.”
“The increase in taxes on income from properties may dampen buy-to-let activity further and hold down the supply of new rental properties coming onto the market, which could in turn maintain some upward pressure on private rental growth,”
Mr Gardner added.
He highlighted that over the past year, annual house price growth slowed, falling from 4.7% at the end of 2024 to 2.1% in mid-2025, and easing further to 1.8% in November.
According to Nationwide, the gap in house prices between England’s pricier south and the more affordable north has narrowed to its lowest level in 12 years.
It explains,
“London was the weakest performing region in the first nine months of the year with annual growth averaging 1.3%. This was part of a wider trend that saw house price growth in the northern regions of England outpacing the southern regions. As a result, the price differential narrowed to its lowest since 2013. The average price of a home in northern regions of England is now almost 58% of that in the southern regions, well above the lows of c48% seen in 2017.”
The City regulator revealed on Monday new measures aimed at helping first-time buyers and self-employed individuals access the property market.
Nationwide revealed that the UK’s average house price in November was £272,998, and a predicted 4% rise next year could raise it to £283,918.
The Bank of England is widely expected to lower its key interest rate by 0.25 percentage points to 3.75% in its upcoming Thursday announcement.
The building society found that while lower interest rates have helped support the housing market in 2025, annual price growth slowed from 4.7% at the end of 2024 to 2.1% mid-year, and then to 1.8% in November.
What did Matt Smith say about home affordability and mortgages in 2026?
Property portal Rightmove has forecast a 2% increase in house prices next year, with a busy Boxing Day expected as budget uncertainty eases.
Matt Smith, a mortgage specialist at Rightmove, said homebuyers can expect lower average mortgage rates as they enter 2026 compared with this year.
He said,
“Those who are seeing slightly lower house prices in their area compared to last year and may have also had an end-of-year pay rise, will see their affordability improved further.”
Mr Smith added,
“Many home-movers will also see that the amount that they can borrow has increased, as lender have been rolling out the loan-to-income and stress rate changes that were permitted by the regulator earlier this year.”
A property expert at Rightmove, Colleen Babcock, said,
“Lower price growth supported buyer affordability and drove activity in the first half of the year, even after the April stamp duty deadline in England. In the second half of 2025, uncertainty caused by rumours of property tax changes in November’s Budget swirled, some from as early as August.”
She continued,
“This had an impact on pricing and activity, as sellers tried to entice nervous buyers. The market will soon benefit from the traditional boost in home-moving activity from Boxing Day. Rightmove’s Boxing Day Bounce is an annual event where we see many begin or resume their plans to move after the distraction of Christmas.”
What did Halifax predict about UK house prices and affordability in 2026?
Halifax delivers a third forecast for the housing market, predicting that property prices will rise modestly by 1% to 3% next year, less optimistic than Nationwide.
Amanda Bryden, head of Halifax Mortgages, said,
“While affordability remains challenging, the picture has improved compared to recent years, driven by a combination of above-inflation wage growth, lower interest rates and some expansion of eligibility criteria from mortgage lenders.”
She stated,
“For those taking their first steps onto the property ladder, monthly mortgage costs as a share of income are now at their lowest level since 2022, with the rate on a typical two-year first-time buyer mortgage (90% LTV) dropping by roughly 0.8 percentage points over the last year.”
“The second half of the year was dominated by speculation about potential tax rises in the run up to the Autumn Budget. While this kept market confidence subdued for a time, both prices and activity broadly held steady,”
Ms Bryden added.
She continued,
“Looking ahead to 2026, we expect house prices to rise modestly, by somewhere between 1% to 3%. While wage growth is expected to slow and unemployment may edge higher, lower interest rates and easing inflation should help to gradually improve homebuyers’ purchasing power.”
What changes are FCA and lenders making to support mortgage borrowers?
The City watchdog, the Financial Conduct Authority, warned that certain lenders’ approach to stress testing could be restricting access to mortgages that would otherwise be affordable.
Following the FCA’s release, several lenders have reduced the interest rates used in stress tests. On Monday, the regulator also announced plans to consult on mortgage market reforms, including more flexible rules to accommodate different income levels and work patterns over a lifetime.
It also hopes to improve guidance for people planning for later life, and is promoting the use of AI to help brokers provide better and faster advice.
The easing of stress test regulations coincides with broadly falling mortgage rates. At the end of last week, the average two-year fixed rate stood at 4.84%, while the five-year fix was 4.91%.
What are the average house prices in the UK?
As of late 2025, the average house price in the UK is approximately £271,531, according to the latest HM Land Registry data. Other major indices, such as Halifax, report a higher average of £299,892, reflecting a stable market with modest annual growth.
The following figures represent average house prices for 2025:
- London: £652,000 (HPI reported £556,000 in September)
- South East: £438,000
- East of England: £388,000
- South West: £352,000
- West Midlands: £279,000
- North West: £247,000
- Yorkshire & Humber: £238,000
- Wales: £235,000
- Scotland: £187,000 (reported in January 2025)
- North East: £191,000