Average UK house prices are projected to decrease by 2% in 2026, according to a revised forecast from Savills. This shift from a previously expected 2% growth highlights the impact of rising mortgage costs on buyer demand, as households grapple with higher borrowing expenses and persistent inflation.
Why Are House Prices Expected to Fall?
The anticipated decline in house prices stems from escalating mortgage rates, which have dampened buyer sentiment and demand. Savills’ head of residential research, Lucian Cook, noted that the increase in borrowing costs since late February has significantly altered the short-term outlook for the housing market. The combination of higher rates and ongoing inflation pressures is leading to a more cautious approach among potential buyers, making it challenging for them to enter the market.
What Does This Mean for Future Growth?
Despite the short-term forecast of a 2% decline, Savills maintains a positive long-term outlook. The firm projects that by 2030, average UK house prices could rise by approximately 18.5%, equating to an increase of around £67,000 based on current values. This optimism is rooted in expectations of improving economic conditions and easing affordability pressures, which are expected to support a gradual recovery in the housing market.
How Will Mortgage Rates Impact Buyers and Investors?
As mortgage rates remain elevated, the immediate implications for buyers and investors are significant. Higher borrowing costs are likely to limit the purchasing power of many potential buyers, which could lead to reduced competition and lower price points in the market. However, Savills forecasts a gradual easing of mortgage rates, with expectations that they will decline from an average of 4.78% at the end of 2026 to around 3.5% by 2030. This reduction could improve affordability and stimulate demand, particularly in regions outside of the more expensive southern markets.
What This Means for Landlords and Property Investors
Landlords and property investors should be particularly attentive to the evolving market conditions. The anticipated decline in house prices may present opportunities to acquire properties at lower prices, especially in the North of England, Scotland, and Wales, where affordability levels are expected to be more favourable. Investors should also consider the potential for long-term growth, as Savills predicts a rebound in prices following the initial downturn.
Frequently Asked Questions
Will the housing market recover after the predicted decline?
Yes, Savills forecasts a recovery in house prices starting in 2027, with projected growth of 2.5% that year, followed by 5% in 2028 and 6% annually in 2029 and 2030.
How can I stay informed about current mortgage rates?
To keep up with the latest mortgage rates, you can visit our current mortgage rates page for updates and comparisons.