UK house prices could increase by as much as 4% in 2026, according to new projections from Nationwide, although the lender suggests that buying a home may become slightly more achievable for some households.
Robert Gardner, Nationwide’s chief economist, said prices are expected to rise by between 2% and 4% next year. He explained that market activity is likely to pick up gradually as affordability improves, helped by wages growing faster than house prices and a modest further fall in interest rates.
Alongside these forecasts, the City regulator has also announced proposals aimed at making it easier for first-time buyers and self-employed workers to enter the housing market, potentially offering additional support to those struggling to buy.
Nationwide reported that the average UK house price stood at £272,998 in November. If prices were to rise by 4% over the next year, this would push the average value close to £284,000.
Interest rates are expected to play a key role in shaping the market. The Bank of England is widely anticipated to reduce its base rate by 0.25 percentage points to 3.75%, which would mark another step down after a period of sustained tightening.
Lower borrowing costs have already helped underpin the housing market during 2025, Nationwide said. However, the pace of price growth has slowed, easing from 4.7% at the end of 2024 to 2.1% by the middle of this year, before dipping further to 1.8% in November.
Other property firms share a similar outlook. Rightmove has forecast house price growth of around 2% in 2026, while Halifax expects prices to rise by between 1% and 3%, as falling interest rates and easing inflation offset weaker wage growth and the risk of rising unemployment.
Matt Smith, a mortgage specialist at a major property portal, said buyers looking to move home are likely to benefit from lower average mortgage rates at the start of the year compared with 2025.
He added that some buyers may also see improved affordability if prices in their local area have softened slightly or if they received a pay rise towards the end of the year. Together, these factors could make monthly repayments more manageable.
Borrowing limits have also begun to ease. Many lenders have adjusted their loan-to-income ratios and stress testing rules following changes allowed by the regulator earlier this year, meaning some buyers can now borrow more than before.
Traditionally, mortgage providers cap lending at around 4.5 times a borrower’s income and assess whether repayments would remain affordable if interest rates were to rise. However, the Financial Conduct Authority (FCA) said earlier this year that some stress testing practices may have been unnecessarily restricting access to affordable mortgages.
Since then, a number of lenders have lowered the interest rate used in their stress tests, increasing the amounts some buyers are able to borrow.
The FCA has also confirmed plans to consult on wider mortgage market reforms. These include simplifying rules to support more flexible mortgage products that reflect varied working patterns and changing income levels throughout people’s lives.
The regulator also wants to improve access to advice for those planning for later life and is encouraging the use of artificial intelligence to help brokers deliver quicker and more tailored guidance.
Mortgage rates across the market continue to trend downwards. According to Moneyfacts, the average two-year fixed-rate mortgage stood at 4.84%, while the average five-year fix was 4.91% earlier this week.
Stronger earnings and more relaxed affordability checks have allowed first-time buyers to take on larger loans. Savills reported that the average first-time buyer borrowed £210,800 in the year to September, the highest level on record.
Nationwide also noted a narrowing gap between house prices in northern and southern England. This is largely due to weaker price growth in London, bringing regional differences to their smallest level since 2013.
Homes in the north now cost close to 58% of the average southern house price, well above the low point of around 48% seen in 2017, highlighting a gradual rebalancing across the country.
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