First-time buyers likely to fuel housing market as rates fall

First-time buyers are expected to drive the UK housing market in 2026, with further interest rate cuts likely tomake property more affordable.

- Julia Kollewe

The for-sale market is forecast to accelerate moderately, with prices rising between 2% and 4%.

Rent rises, meanwhile, are likely to slow after the rapid increases of recent years, according to lendersand estate agents.

With mortgage rates falling, earnings growth running ahead of inflation and house prices rising slowly, monthly mortgage costs for first-time buyersasa share ofincome are at their lowest level since 2022, according to Halifax.

House prices across the country rose less than expected in 2025, after a stamp duty tax break expired at the end of March and buyer confidence was knocked first by Donald Trump’s tariffs in April, and later by speculation about property tax changes before Rachel Reeves’s budget in late November.

Property values climbed by 1.8% inthe year to November, leaving the average home valued at £272,998, Nationwide building society said.