Analysts now see slower gains and stronger rent growth, with affordability easing only modestly for first-time buyers
House prices in the UK are expected to rise more slowly than previously forecast, after a Reuters survey found analysts scaling back expectations as the prospect of near-term interest rate cuts has faded following the outbreak of war in the Middle East.
The poll of industry analysts put average annual house price growth at 2.5% in 2026, followed by 3% in each of the next two years. That compares with a Reuters poll in December which pointed to a 2.8% increase in 2026 and 3.3% in 2027.
“Looking ahead, the Bank of England is going to have a difficult job and interest rates may now have to go up,” said Ray Boulger, mortgage broker at John Charcol. He now expects prices to rise by 2% this year and 3% next year, down from his earlier forecast of 4% in both years.
Mortgage pricing has also shifted since the conflict began, with banks raising rates materially.
London — often supported by overseas demand — is forecast to record weaker growth than the national average. Analysts in the poll expected prices in the capital to rise 1% in 2026, 2% in 2027, and 2.8% in 2028.
Meanwhile, urban rents are expected to increase by more than 3% this year and next, outpacing house price growth.
“After softening in 2025, rental growth on newly let homes across Britain is set to reaccelerate this year, likely running just ahead of broader inflation,” said Aneisha Beveridge, analyst at Hamptons. “Demand remains cooler than it was a few years ago - with more renters becoming homeowners, fewer students, and more young adults living with parents for longer - but the bigger story is still supply.”
Beveridge and other respondents also pointed to the Renters’ Rights Act, which is intended to reform the private rental sector and strengthen tenant security, but which critics argue may discourage landlords, adding to the shortage of homes available to let.
A separate Reuters poll of economists suggested the Bank of England is more likely to wait until April or June for its next cut, with many stepping back from expectations of a reduction tomorrow, as energy prices linked to the Iran war add to inflation risks.
Despite higher mortgage costs than some had anticipated, more than 80% of respondents to the home-price survey said affordability for first-time buyers would improve. However, saving a deposit remains a barrier. Rightmove put the average asking price for a first-time buyer home at £226,995, leaving a 10% deposit out of reach for many households.
“We expect more competitive mortgage rates alongside a more muted outlook for price growth will improve affordability,” said Marcus Dixon, director of UK residential research at JLL.
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