The outlook for 2026 certainly feels more positive than the autumn of 2025, which was plagued by uncertainty amid pre-Budget speculation of a raid on the housing market in the form of higher taxes. What came to pass wasn’t as bad as many had feared or been led to believe, although there was a notable lack of encouragement or impetus from the Government to help first-time buyers – the lifeblood of the market – onto the property ladder through some form of revised Help to Buy scheme or Stamp Duty concession.
Improving transaction levels by encouraging first-time buyers to purchase their first home, enabling second-steppers and beyond to move up the ladder, is crucial to a thriving housing market which also benefits the wider economy – and we hope this is something the Government looks to address this year.
Interest Rates
With the Budget out of the way, confidence has improved now we have some clarity. A base-rate cut to round off last year – following quarter-point reductions in February, May and August – also helped sentiment.
“December’s base rate cut to 3.75% meant interest rates finished the year one percentage point lower than they started, which has had a significant impact on buyer and seller activity. Affordability is improving, albeit slowly, as the cost of living remains high. Lenders remain keen to lend and have money available to do so; what’s more, the subdued market at the end of last year means they are keen to make up business.”
At the time of writing, of the big lenders, HSBC, Barclays, Halifax and NatWest have already reduced their mortgage rates this year, although Santander has moved the other way and increased some of its pricing, citing the rising cost of funds. Those lenders who can’t compete on rate look set to continue to broaden policy and ease criteria this year, leading to greater borrowing potential for applicants and more choice for those requiring higher loan-to-values. Smaller building societies and specialist lenders will continue to focus on their particular niche, and borrowers would do well to consult a whole-of-market mortgage broker when taking out a home loan to ensure they don’t miss out on any hidden ‘gems’.
Market expectations are for one to three base rate reductions in 2026 with base rate finally settling between 3% and 3.5%. The timing of further reductions will depend upon inflation, the labour market and wage growth – all of which will be closely monitored by the Bank of England.
Remortgaging
According to UK Finance, there are 1.8 million homeowners who are due to remortgage this year, with many of those coming off low five-year fixes and facing potential ‘payment shock’, even though rates have eased recently. Mark says: “While rock-bottom rates are no longer available, the situation is not as dire as it might have been. Leading two-year fixes are now available from just over 3.5% while their five-year equivalents start from just over 3.7%. What’s more, further gradual falls are expected.”
It will be interesting to see whether borrowers stick with their existing lenders and opt for a product transfer or go through the whole process of a new application and remortgaging to another lender. There is a growing trend for the latter, with the Bank of England reporting that approvals for remortgaging (which only capture remortgaging with a different lender) rose by 3,200 to 36,600 in November.
If you are due to remortgage this year, it is worth getting a whole-of-market broker such as SPF Private Clients to look at what your lender is offering you and compare with what else is on the market – if the offer from your lender is the best option for you, then SPF will advise you stay with your lender and handle the product transfer on your behalf. Rates can be booked up to six months before you need them so it’s worth planning ahead for peace of mind; if, by the time you come to remortgage rates have fallen again, you should be able to move onto a cheaper rate at that time. If, on the other hand, rates have risen, you will be glad you secured a deal when you did.
House Prices
In the first week of this month, Nationwide and Halifax reported on their house-price indices for December, indicating that price growth slowed last year and, in some areas, prices are falling. Nationwide reports that the average price fell to 0.6% in December from 1.8% in November and is forecasting average UK house price growth this year of 2% to 4%. Meanwhile, Halifax reported a 0.6% dip in prices in December following a 0.1% drop the previous month, and forecasts a “modest rise” in prices this year of between 1% and 3%. The increase in available stock has put buyers in a stronger negotiating position and this is keeping a lid on price increases, while affordability pressures persist, even with the recent rate reductions.
National average house prices are useful to a degree, but they can conceal significant regional differences which buyers would be wise to pay closer attention to. For example, Northern Ireland saw a 7.5% increase in house prices last year with an average price of £221,062, compared with a 1.3% fall in prices in London and an average price of £539,086, according to Halifax. This underlines the impact of affordability on buyer budgets with homebuyers in London and the South-East finding it particularly difficult to raise the deposits they need and satisfy lenders that they can afford their monthly mortgage repayments.
The Renters’ Rights Act and Buy-to-Let
2025 was a year of uncertainty for landlords as the Renters’ Rights Act, which ends no-fault evictions and replaces fixed-term tenancies with rolling ones, among other measures, made its way through Parliament. We now know the first phase is due to become law on 1st May 2026, which at least will enable landlords to plan ahead.
Howard Levy, Buy-to-Let adviser at SPF, says: “The market is undoubtedly heading towards professional landlords predominantly running the private rental sector. But if Buy-to-Let mortgage rates continue to fall and rents increase, the number of smaller landlords leaving the market could be outweighed by new entrants to the sector tempted by the increase in potential returns.”
On the lending front, not only has mortgage pricing eased but there is more product choice for landlords buying via a limited company, or moving existing portfolios into such a structure as a growing number of investors go down this route.
With the Chancellor announcing additional tax on rental income in the Budget, it is increasingly difficult for landlords to make money if they have an investment property in their own name.
“We had countless enquiries last year from landlords considering incorporation. However, while there are many benefits from doing so, the whole process needs careful planning and consideration, and expert advice. The timing of an incorporation is very important as the mortgage broker needs to work with the landlord’s accountant to ensure it is done in the most tax-efficient way, but this is an area of business we expect to increase in 2026.”
Seek advice
As always, seeking independent advice is extremely important. A whole-of-market broker such as SPF Private Clients will talk you through all the options available to you and advise on the best product for your circumstances. Do get in touch for more information if you are planning on buying or remortgaging your own home or investment property this year.
