Could 2026 be the year the housing market finds its feet? - Andrew Milnes
As 2025 draws to a close, the UK housing market finds itself at a pivotal point.
While the Chancellor’s autumn budget was a quiet one for our industry, the real optimism lies in what this could mean for mortgage rates next year.
Rachel Reeves’s commitment to lowering inflation is the green light the Bank of England needs to continue its course of gradually lowering the base rate. Following a nail-bitingly close vote by the Monetary Policy Committee (MPC) to hold rates in November, this latest development means a rate cut this month is more likely to be on the cards, with further reductions anticipated throughout the next year.
If things go as planned, the base rate could settle at around 3.5 per cent by the summer, firmly cementing itself in the 'new normal' rate environment of three-to-four per cent. This would mean we’re another step closer to removing the affordability barrier that’s been restricting market activity for the last two years.
Another huge jump forward in breaking down affordability barriers is through the range of new mortgage products out there, and the great strides lenders have made over the last 12 months. Notably, the launch of higher loan-to-value products has been a lifeline for those who struggle to raise a deposit under specific circumstances. The market has also been strengthened by the entry of new lenders this year - something which should be applauded and that I sincerely hope continues into 2026.
Furthermore, the way the mortgage industry continues to embrace technology is accelerating at pace. The speed and adoption of AI by lenders to streamline the time it takes to process a mortgage application is beginning to yield incredible results, with some providers already offering 24 hour mortgage offers.
While the overall sentiment post-budget is to ‘keep calm and carry on’, we have to admit that the outcome was somewhat underwhelming, providing minimal impact for prospective and current homeowners. However, the Chancellor did deliver a ‘rabbit out of the hat’ in the form of an annual reduction in energy bills, as well as reinforcing her commitment to ongoing investment in planning. As always, the devil will be in the details, so we’ll wait and see to establish the impact once the dust settles.
Where the budget fell short was on implementing long-overdue, much-needed reforms for our industry. While acknowledging other pressing national priorities was understandable, the opportunity was missed to deliver significant changes the market desperately needs, including a stamp duty overhaul, council tax reform, and more support for landlords.
Despite these missed opportunities, the news that inflation is receding, and interest rates should follow, means a quiet revolution for the housing market is on its way. With affordability improving due to lower rates, the overall outlook for 2026 remains one of cautious optimism.
With new mortgage products, a gradually declining economic forecast, and increasing affordability on offer, seeking expert mortgage advice has never been more important.
Andrew Milnes is head of the Mortgage Advice Bureau, Bingley, 01274 891312.