UK Property Market Forecast for 2026: What Buyers Should Expect

Inflation and Interest Rates: The Foundation of the 2026 Forecast

Inflation remains one of the strongest influences on UK property market behaviour. By late 2025, inflation had finally begun to fall towards the Bank of England's 2% target. This cooling trend is expected to continue into 2026, but the pace of decline is uncertain.

Lower inflation generally creates downward pressure on interest rates, but the tightening of monetary policy during 2023–2025 still lingers. As of early 2026, most analysts expect:

• Mortgage rates to stabilise between 3.75% and 4.75% for mainstream products
• Tracker rates to ease slightly if the base rate is cut further
• Two and five-year fixed products to remain competitive but not return to ultra-low pre-2022 levels

This creates a more predictable borrowing environment for buyers, though affordability challenges remain. Places like Lancaster, Preston, and Blackpool - typically more affordable than major southern cities - may see steadier demand because lower price points reduce sensitivity to small rate changes.

For a deeper view of how estate agents assess price movements in changing markets, see How Estate Agents Value Your Home.

House Price Trends for 2026: Stabilisation With Localised Fluctuations

The broad consensus among lenders and market analysts is that house prices in 2026 will likely stabilise, with some modest growth in certain regions. However, this does not mean uniform performance across the UK.

Projected National Outcome for 2026

• 0% to 2% annual price growth nationally
• Stronger performance in well-connected regional cities
• Slight price corrections continuing in overheated markets

The stabilisation is largely due to improved mortgage affordability and an uptick in buyer confidence after the uncertainty of the early 2020s. Supply remains constrained in many areas, limiting downward price pressure despite softer demand.

Why Regional Divergence Will Continue

As always, the national average masks substantial local variation. For instance:

• Preston may outperform the UK average due to strong employment growth, university influence, and ongoing regeneration.
• Lancaster often sees resilient demand from families, commuters, and academics, supporting stable prices.
• Blackpool, with historically lower price points, may see more first-time-buyer interest but slower price appreciation due to higher rental stock and seasonal economic patterns.

These local examples highlight how buyers looking for value may increasingly target northern regions with strong connectivity and regeneration investment.

Buyer Demand in 2026: Recovering but Selective

Demand fell sharply during the rate rises of 2023–2024, but 2025 showed clear signs of recovery. Entering 2026, buyer interest continues to strengthen, but buyers are more cautious and analytical than in previous cycles.

The Key Drivers of Demand in 2026

• Improved mortgage affordability due to falling inflation
• Increased employment stability in most regions
• More properties being listed after years of low supply

However, demand is not uniform. Young buyers remain constrained by deposit requirements, while upsizers remain highly sensitive to mortgage costs. Downsizers, on the other hand, remain one of the most active groups in the market.

To see how current trends compare to earlier periods, you can review recent discussions in the Market Updates Blog.

Supply Levels: Will More Homes Come to Market in 2026?

The UK's chronic shortage of housing continues to play a significant role in price stability. Despite government commitments, housebuilding levels remain below desired levels. Data from the DLUHC suggests that completions are unlikely to reach the 300,000-per-year goal in 2026.

That means even modest demand increases will continue to support prices. Local areas with active new-build pipelines - such as parts of Preston and Barrow - may see slightly more balanced supply/demand dynamics, but most markets will remain undersupplied.

Affordability in 2026: Improvement, But Not a Full Recovery

Affordability remains a defining issue for the market. While mortgage rates are lower than the peaks of 2023–2024, wages have not risen as quickly as house prices over the past decade.

In 2026, expect:

• Slight improvements in affordability due to rate stabilisation
• Increased access to 95% and 100% mortgages for lower-value regional markets
• More first-time buyers returning, particularly in northern cities

Areas like Blackpool and Lancaster - where average prices remain significantly below the national median - are likely to attract more first-time buyers compared to higher-cost southern markets.

Rental Market Outlook for 2026

The UK rental market faces its own pressures as supply remains limited while demand rises. This imbalance is particularly strong in university towns and employment hubs, both of which apply to Lancaster and Preston.

In 2026, expect:

• Rents to increase modestly, though slower than the dramatic rises of recent years
• Landlords to prioritise energy efficiency to meet regulatory expectations
• Growing tenant interest in high-quality, well-maintained homes

However, rental yields will remain highly location-dependent. Coastal towns like Blackpool may offer strong gross yields but require careful assessment of long-term tenancy demand.

Economic and Political Factors Shaping the 2026 Forecast

The direction of the housing market in 2026 depends significantly on wider economic and political developments. Potential influences include:

• Further Bank of England base rate reductions if inflation remains controlled
• Government incentives for first-time buyers or regional development
• Changes to planning laws that could impact new-build supply
• Global economic shifts that affect inflation or investment confidence

It is also worth noting that the North West continues to benefit from regeneration investment, particularly in Morecambe, Lancaster and Preston, which may support regional price resilience even when national sentiment weakens.

Should Buyers Wait or Move Quickly in 2026?

The decision whether to buy now or wait depends on personal circumstances, not just market forecasts. However, a few balanced observations can help buyers make informed decisions:

• If mortgage rates fall further, affordability increases - but competition may rise.
• If supply increases, buyers gain more choice - but prices may stabilise or rise slightly.
• If inflation falls quicker than expected, lenders may expand product ranges.

That said, timing the market perfectly is impossible. Buyers instead benefit most from understanding their local market - such as Lancaster's consistent demand or Preston's growth sectors - and securing a mortgage product aligned with their financial stability.

Regional Insight: How Lancaster Reflects Wider UK Market Trends

Lancaster, like many well-connected regional cities, presents a strong example of how local markets may perform in 2026: resilient, moderately priced, and supported by a diverse economy. Those exploring homes in the area can find more local insights via the Lancaster Branch.

A More Stable but Still Dynamic Market Ahead

The UK property market forecast for 2026 points toward greater stability than recent years, but not without challenges. Prices are expected to level out or grow modestly, mortgage rates may ease slightly, and buyer confidence is returning – yet affordability remains a barrier for many.

For most buyers, the key to navigating 2026 successfully will be to follow national trends but make decisions based on their preferred local market. Whether looking in Lancaster, Preston, Blackpool, or elsewhere in the UK, understanding local dynamics – and how they diverge from national averages – remains essential.

While this forecast is grounded in the latest data from trusted sources such as the Bank of England and the ONS, the property market can still shift in response to unexpected economic or political events. Forecasts provide useful direction, but no one can predict the future with absolute certainty. Staying informed and regularly reviewing the market remain the best approaches for buyers and sellers alike.

For ongoing updates throughout the year, visit the Farrell Heyworth Market Updates Blog for further insights and analysis.

Key Takeaways for 2026

For readers wanting a concise breakdown of the 2026 outlook, here are the essential points:

• 0–2% house price growth forecast nationally, with stronger performance likely in select northern regions.
• Mortgage rates stabilising around 3.75%–4.75% for most products.
• Improved market confidence following the volatility of recent years.
• Affordability improving gradually, though still challenging for first-time buyers.
• Rising rental demand in university and employment hubs, especially Lancaster and Preston.
• Local factors matter more than ever as regional markets diverge from national trends.

2026 Market Snapshot Table

Market Factor	2026 Outlook	Impact on Buyers
Mortgage Rates	3.75%–4.75%	More predictable borrowing costs
House Prices	0–2% growth	Stable buying environment
Inflation	Trending toward 2%	Greater financial stability
Rental Demand	Strong	Competitive rental market

Expert Commentary

According to Laura Gittins, PR & Marketing Manager at Farrell Heyworth, “2026 represents a shift away from the volatility of the past few years. Buyers who focus on long-term value and understand the distinct differences between local markets - particularly across Lancashire - will be best positioned to make confident decisions.” You can connect with Laura on LinkedIn.

Methodology & Data Sources

This forecast is informed by a combination of:

• Economic data from the Bank of England
• Housing market statistics from the ONS
• Government policy updates from the DLUHC
• Regional market trends observed by Farrell Heyworth across Lancaster, Preston, Blackpool and the wider North West

The combination of national data and local market insights provides a balanced, evidence-led forecast designed to support buyers, sellers and investors throughout 2026.

About the Author

Laura Gittins is the PR & Marketing Manager at Farrell Heyworth, specialising in market commentary, regional housing insights and consumer guidance. Laura works closely with internal teams and industry partners to deliver trusted updates on the North West property market. Connect with her on LinkedIn.