A significant shift is forecast for the UK property market in 2026, with first-time buyers poised to become the primary driving force behind sales activity. This change follows anticipated cuts to interest rates, which are set to improve affordability for new entrants to the market.
Market Outlook: Price Rises and Slowing Rents
Analysts predict the for-sale market will see a modest but steady increase in values, with projections suggesting house price growth of between 2 per cent and 4 per cent over the year. This follows a period of relative stagnation in late 2025, which Marcus Dixon, Head of Residential Research at JLL, attributed to budgetary uncertainty. "Uncertainty around the budget pretty much killed the market in the second half of 2025, so we were kind of just treading water," he noted.
In a welcome development for tenants, the rapid escalation in rental costs is expected to slow considerably in 2026. This will provide some relief after the significant hikes renters have faced in recent years.
Improved Affordability for New Buyers
Key to the resurgence of first-time buyers is improved mortgage affordability. According to the Halifax, monthly mortgage costs as a share of income are at their most favourable level since 2022. This is further aided by lenders potentially accepting lower deposits.
Emily Williams, a Director of Residential Research at Savills, explained the impact: "Buyers might be able to purchase with a 15% or 10% deposit, and that makes a huge difference, particularly in London and the south-east. That’s certainly knocking two or three years off the amount of time that you need to save for deposits."
The Broader Market Context
Aneisha Beveridge, Head of Research at Nationwide, confirmed the growing prominence of this group: "First-time buyers are becoming a real kind of key driving force in the housing market. But that partly reflects the fact that other people aren’t moving as often because stamp duty costs are so high."
The market enters 2026 from a base where the average UK home was valued at £272,998 in 2025, according to Nationwide Building Society data. Property values saw an increase of 1.8 per cent in the year to November 2025, with overall annual growth for the year estimated by estate agents at between 1 per cent and 2 per cent.
