It’s that time of year again where we put our neck on the line and tell you what we think will happen in the property and mortgage market in 2026. These are our predictions that we have made from what we have seen in in our advising throughout the course of 2025, the implications of the newly introduced tax legislation from the delayed 2025 Autumn budget and leading market economists forecast for 2026. 

 

In this blog we will cover our predictions on interest rates, house prices and the buying trends that we expect to play out over the course of 2026 and highlight the contributing factors in detail below that we think will lead to these outcomes. 

We expect interest rates to continue to fall in 2026. In 2025 we saw the Bank of England base rates fall from 4.75% to 4% from January to December. Economists expect to see the base rate fall further throughout 2026, with a prediction that the base rate will hit 3% by December this year. 

The Bank of England’s first meeting of the year is on the 5th of February so we could see our first rate cut then. Unless any disaster, or event comes out of left field we expect the rate drops to be gradual throughout the year to avoid any market volatility so we predict the rate drops will follow the trend of 2025 and be 0.25% at a time. 

 

Our general feeling is that we expect to see more 1st time buyers enter the market in 2026 due to a mixture of the renter’s right act coming into force, lowering interest rates, ISA changes and wealth trends as people adjust to tax changes. Over the last couple of years 1st time buyers have made up over 1/3 of the market and we expect this trend to continue, and here’s why… 

The renters right act will be brought into effect from 1st May this year will make it more difficult for landlords to evict tenants without due cause with the ‘No fault eviction’ process being introduced. It has also been made harder to increase rents and restrictions on tenant criteria being lifted makes it more restrictive to be a buy to let landlord in the UK. Landlords must now follow strict and formal guidelines on how they can increase rents and can only do so once per year under the new act. Adding the 2% increase in property income tax and dividend income due to be introduced in 2027 means landlords are seeing less profit from their property endeavours and less control over their properties which may lead to them offloading their properties. We expect to see the 2% increase in property and dividend tax to act as a deterrent to landlords moving their properties over to a ltd company to use the tax advantages of a LTD company structure also. 

 

To move a property over to a LTD company will not cost you 5% stamp duty, additional legal costs, potential capital gains tax as well as now paying an additional 2% on the dividends you draw from that company structure making it less attractive for landlords to move and even hold properties in a LTD company. This we feel will likely force some landlords simply to sell these properties rather than incur these additional costs to move the properties as they will not see the advantages for many years afterwards due to these changes. 

 

Although the changes to property and dividend tax do not kick in until 2027, proactive landlords will begin to offload their properties in preparation for the new tax changes hitting them in 2027. 

 

Typically, the properties landlords own are on the cheaper end of the market as they provide a higher yield and better cashflow. This will see an increase of ‘affordable’ and ‘typical’ 1st time buyer type homes enter the market. 

Over the course of 2025 many high street lenders eased their criteria to support 1st time buyers by increasing their affordability multipliers from the standard 4.5x income to up to 6x annual income in certain circumstances. This gives borrowers a huge boost on the amount they can borrow and the properties they can buy. More lenders can now offer buyers a 40-year term (depending on their age) which can lower their monthly repayments making it more affordable to buy a home. 

 

Lenders are all fighting for 1st time buyer business as they make up 1/3 of the market currently, so the ‘bigger lenders’ such as Nationwide and HSBC are offering buyers cashback on their mortgage products ranging from £500 - £2,000, This is paid to the borrower on completion and can be used to cover their moving costs such as adviser fee and solicitor fees making it even easier to buy. 

Within the delayed Autumn budget announced in November, the labour government introduced changes to ISA thresholds. The £20,000 annual allowance remains in place, but within that £20,000 limit the new change requires that £8,000 must be invested in a stocks and shares ISA and the remaining £12,000 to be invested in a standard cash ISA. This does limit the amount you can put into a standard cash ISA, so for those who just wanted to put money away in the most basic form they will be capped on what they can save. But for those who are more financially savvy they can invest more into stock and shares as opposed to a simple savings account which could provide a higher return on their savings. 

 

These changes will not take effect until 2027 so for this year it’s business as usual really. The best advice for savers aiming to save a deposit is to continue maximising your lifetime ISA to gain the full 25% bonus. If you are fortunate enough to save more than the £4,000 Lifetime ISA limit, we advise you to put the remaining amount into a high interest cash ISA as you continue your saving. 

The Labour government also increased the national minimum wage from £12,21 to £12,71 per hour in the Autumn budget which will give those on minimum wage jobs an average of £900 per year more to spend which will boost their mortgage affordability and their savings to support their buying power. There is a caveat to this, the government also froze the income tax thresholds so this may bump many minimum wage workers into paying tax. So, although they may be £900 per year better off, they may lose some of that increase to tax. 

 

This will create what is known as ‘fiscal drag’ which means more people are pushed into higher tax bands (Nontax payers into basic, and basic into higher rate tax) but they will see more of that money in their own pocket. For example, if you now become a tax-payer and earn £100 over the tax threshold, you will pay £20 in tax but keep the remaining £80 for yourself. 

 

The scrapping of the 2-child cap on benefits will provide those with 3 or more children with an average of £5,310 more per year in potential universal credit and child benefit income which can be used for mortgage affordability and general spending. With more money to spend due to these 2 factors this increases buyer confidence to spend money and spend money on bigger purchases like a house. 

 

Since the spring budget of 2024 which then made pension inheritance liable to inheritance tax we saw an influx of our 1st time buyer clients from then until now using a gift from their grandparents as well as parents towards their deposit as elderly family members wanted to gift their grandkids money before inheritance tax applied so they could enjoy their grandkids using that money before they passed. Normally we see gifted deposits from parents only, but since that budget of 2024 we have seen a spike in grandparents giving away their wealth early to help their grandchildren before it is taxed on their death. 

 

With all these factors in place, 1st time buyers have the best opportunity they have had in several years to buy their 1st home. With bigger deposits from increased savings and family support, lower interest rates and more surplus income to spend and easing lender criteria – this creates a perfect opportunity for 1st time buyers to act in 2026. 

According to Saville’s house prices are expected to increase by 4% throughout 2026. This will be driven by lowering interest rates making it cheaper to buy a home, 1st time buyers having more deposit from more surplus income through the increase in minimum wage, increased savings from a longer period of saving and the likelihood that relatives will be gifting them money to put towards their 1st home. Having said that, ‘a rising tide raises all boats’. Just as one house goes up value, so do the other houses on the street so the gain you make will be spent on buying a new property which will have also gone up in value. 

 

With falling interest rates, you have more people able to secure borrowing that is affordable for them which means more buyers enter the market, increasing demand for each property which will drive up the price of each property as buyers outbid one another for the property they fall in love with. 

 

We expect to see an increase in property prices at the cheaper end of the market with minimum wage increasing and benefit income increasing for families with 2 or more children, creating more potential buyers of cheaper properties with cheaper money to spend in the form of lowering interest rates, targeting cheaper properties entering the market being offloaded by landlords in preparation for the increase in property tax. 

 

Although the government are introducing the ‘Mansion tax’, this is going to take effect until 2028, so we don’t expect to see much difference in property prices at the higher end of the market until then. The other side of this is that the tax implication of owning a property valued at £2m is only £2,500 extra on top of your council tax payments. Those that can afford to buy and run a property valued at £2m should comfortably be able to afford the £2,500 annual increase in tax to hold this property so shouldn’t cause any spending or psychology changes there. 

 

Lower interest rates make it cheaper to borrow money with then makes buying a property easier. With more people able to access the money they need and more cheaply this will encourage more people to consider buying a property in 2026. More people with money to buy a property - increases the demand for property which will - increase property prices. 

The property market goes through cycles which repeat each year. Year after year we see the most buying and selling activity in January. This is a mixture of the ‘New year, New me’ mentality where those who have wanted to buy a house for a while make this the year, they finally get on the property ladder. We have those people who failed to act in November and December as they didn’t want to commit to a house purchase or sale in the run up to Christmas. You also see those have another Christmas in their home and realise that when they invite the family to dinner that their home isn’t big enough anymore and look to upsize. But sadly, January is the month that more divorces are filed than any other month of the year meaning that couples look to sell their family home and start again. 

 

But the hardest month of the year to sell is December – because of the run up to Christmas, and the lack of commitment to a big purchase at the most expensive time of year for most. The shorter days and longer nights and the poor weather limit the time that buyers want to view properties. 

 

So, this year we expect more cheaper properties to come to market as landlords offload some of their stock due to increased tax and regulations. More first-time buyers in the market with more money to spend, cheaper money to use from more lenient lenders and bigger deposits due to family support. We see interest rates to fall, which makes borrowing cheaper and more people entering the market to use this cheaper money which will in turn increase demand for properties and drive up those property prices.