What’s next for the UK housing market in 2026?

What will happen to home affordability in 2026? 

The mortgage market this year will be shaped by the same forces as in recent years: improving economics and easing but persistent affordability challenges. Falling inflation and interest rates, alongside stronger real wages, will provide positive support to the market, but ongoing supply and demand imbalances means moderate house price growth and no radical changes in affordability. 

Transaction volumes across all mortgages are likely to remain broadly flat year-on-year, at around 1.4 to 1.5 million. First-time buyer (FTB) numbers may dip slightly due to the spike in transactions that completed before the end of the stamp duty holiday earlier in 2025, but overall, we anticipate the market will be stable. The fundamentals – levels of supply, affordability, and confidence – will continue to set the pace. 

Progress for first-time buyers 

First-time buyers remain at the heart of the UK housing story. Encouragingly, their numbers have increased over recent years. But beneath the headline, there’s a tale of two groups: those with parental support for deposits, and those without. For the latter, especially under-35s, the challenge of buying a home is acute. The main barriers to home ownership for younger adults are determined by wider macroeconomic forces beyond the housing market – including weak productivity and income growth relative to house prices – for much of the past two decades. 

Policy and regulatory changes are moving in a helpful direction. Stress rates, which are used to help determine the monthly payments that borrowers can afford, have reduced, increasing access to mortgages. As a result, most lenders have increased how much first-time buyers can borrow relative to incomes.

Thanks to lower interest rates, the gap between average monthly rents and mortgage payments has narrowed. Yet, for those without family support to put towards a first deposit, the barriers remain high. There’s no single lever to pull – we need a myriad of solutions to increase all forms of housing supply alongside targeted support for first time buyers to help close the gap and increase access to ownership. 

Innovation is happening, with technology and new lending models potentially increasing access. The FCA’s upcoming consultation on expanding access for FTBs and underserved groups is expected during the first half of the year. This could help unlock further support, particularly around rental recognition and new products. But the fundamentals will take time to shift.

The modernisation of conveyancing is a particular focus for the government, with the potential to deliver a faster and more reliable home buying and selling journey, reducing the proportion of transactions that fail and make the process smoother for all parties. These changes will take time, but the direction is clear: regulatory developments are seeking to shape a market with greater support for buyers, transparency, and efficiency. 

Regional disparities: the north-south divide persists 

It matters where you live in the UK. Projections of average national house price growth of between 1% and 3% masks significant regional variation. Markets in the North, North Wales, Scotland, and parts of the Midlands are likely to see greater price increases, thanks to lower income-to-price ratios. House price growth in London and the South East will remain subdued, with high transaction costs and stretched affordability dampening sentiment and access. 

This north-south divide will continue the trends seen in 2025, and while easing mortgage interest rates and price increases will support activity in northern markets, southern regions will face ongoing challenges. Housing availability, affordability, and sentiment will continue to vary widely across the country, and policy makers must consider these differences when designing interventions. 

2026 promises to be a year of steady progress for the UK housing market. The macro environment is broadly supportive, with falling inflation, lower interest rates, and real wage growth underpinning confidence. Regulatory change and technological innovation offer a path to greater efficiency and support, especially for first-time buyers. 

Yet, challenges remain. Affordability is stretched, supply is constrained, and regional disparities persist. For those without family support, the path to home ownership remains difficult. The private rental sector faces reform, with the need for effective enforcement and practical support. 

As ever, there’s no single solution to increasing access to housing. Progress will be incremental, shaped by policy, innovation, and the levels of resilience among buyers, sellers, landlords, and tenants. For industry professionals, policy makers, and investors, the outlook is one of cautious optimism; a market supported, not transformed, but with real opportunities for those ready to adapt.