First-time buyers ‘will drive 2026 sales’ amid interest rate cuts

First-time buyers are expected to drive the UK housing market in 2026, with further interest rate cuts likely to improve stretched affordability. The for-sale market should accelerate moderately, with prices rising by 2% to 4%, while rent rises are likely to slow from the rapid increases of recent years, according to lenders and estate agents.

With mortgage rates falling, earnings growth running ahead of inflation, and house prices rising slowly, monthly mortgage costs for first-time buyers as a share of income 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 around property tax changes before Rachel Reeves’s budget in late November.