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2026 property market predictions and what they mean for you

Published: December 4, 2025 by Jennifer Armstrong

Even if you don’t plan to purchase property in 2026, market trends could still affect you, including the amount of interest you pay on your mortgage. Here are four key forecasts to be aware of.

1. Economists predict the Bank of England will cut the base interest rate in 2026

The Bank of England’s (BoE) base interest rate directly affects the cost of borrowing, including through a mortgage.

Throughout 2025, the central bank cut the base rate as inflation fell. This trend is expected to continue into 2026.

As of November 2025, the base rate is 4%. Many economists predict several cuts in 2026. According to an article in This is Money (26 November 2025), HSBC predicts that interest rates will fall to 3% by the end of 2026.

This could be good news if you’re repaying a mortgage. Homeowners with a variable-rate mortgage would likely see the interest rate they pay fall shortly after an announcement, which would reduce their monthly repayment. Those with a fixed-rate mortgage could benefit from a more competitive interest rate when their current deal ends.

While interest rates are expected to fall, it’s important to remember this is not guaranteed. Numerous factors influence the BoE’s decision, and the base rate may remain where it is or even rise.

2. Sluggish house price growth is anticipated throughout 2026

House prices have been edging up in 2025. The Halifax House Price Index (7 November 2025) found the average house price in the UK was just under £300,000 in October 2025. In the three months to October 2025, house prices increased by 0.5%.

While property prices are rising, they’re increasing at a slower pace than they were in 2024. The sluggish pace is expected to continue into 2026.

Indeed, estate agent Savills halved its previous forecast for house price growth for 2026 to 2% amid “lingering economic concerns”. However, the company added that it forecast real-terms value growth from 2027 onwards, driven by a strengthening economy.

If you’re a homeowner, house price growth can affect you in several ways.

First, property prices might change your plans if you’re hoping to move or borrow more against your home. Getting an accurate valuation of your home could help you make an informed decision.

Second, the value of your home affects the equity you hold in the property. As a result, when property prices rise, you may be able to secure a more competitive interest rate when you remortgage. A mortgage adviser can help you assess your loan-to-value ratio and identify which deals could be right for you.

3. The “mansion tax” is likely to affect sales of properties worth more than £2 million

In the November 2025 Budget, the chancellor announced a High Value Council Tax Surcharge, dubbed the “mansion tax” in the media. This surcharge will apply to homes valued at £2 million or more, and is expected to affect the top 1% of properties.

From April 2028, the annual charge will be paid in addition to Council Tax at the following rates:

Property value	Annual High Value Council Tax Surcharge
£2 million – £2.5 million	£2,500
£2.5 million – £3.5 million	£3,500
£3.5 million – £5 million	£5,000
More than £5 million	£7,500

It’s expected that the surcharge will increase in line with inflation from 2029/30.

As a result, buyers searching for a home exceeding the £2 million threshold will need to factor in this additional cost. For some, it may mean they delay a purchase or opt for a property that is below £2 million.

4. A higher tax rate on landlords could lead to more property listings and rising rent

Another Budget announcement is set to affect landlords.

From April 2027, there will be a 2% increase in Income Tax rates on property income. In effect, this means the basic, higher, and additional rates of Income Tax will be 22%, 42%, and 47% respectively for earnings from property. The change is likely to increase the tax liability for many with buy-to-let portfolios.

There’s still some debate about what this will mean for the property market. Some expect more landlords to be pushed out of the market, leading to a rise in properties for sale. Other experts anticipate that landlords will pass on this tax bill by increasing the rent they charge.

Get in touch to talk about your mortgage

Whether you’re hoping to move in 2026 or your current mortgage deal will end soon, feel free to get in touch. We could help you secure a mortgage that suits your needs.

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.

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