Updated:
December 12, 2025 00:07
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UK home prices are forecast to rise modestly in 2025 and 2026, while the Bank of England is expected to cut rates to 3.75% in December and further by March 2026. These moves aim to boost affordability, though urban rental costs may remain a challenge for buyers.
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The latest Reuters poll reveals that UK home prices are forecast to increase by 2.0% in 2025 and 2.8% in 2026, reflecting a slowdown from earlier projections. Simultaneously, economists overwhelmingly expect the Bank of England (BoE) to cut the bank rate by 25 basis points to 3.75% on December 18, with further reductions likely in early 2026. These moves signal a cautious but steady easing of monetary policy as inflation pressures ease.
Notable Updates:
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UK home prices are projected to rise by 2.0% in 2025 and 2.8% in 2026, lower than previous forecasts.
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The Bank of England is expected to cut rates to 3.75% on December 18, according to all 64 economists polled.
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By end-March 2026, two-thirds of economists predict the bank rate will fall to 3.50%.
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Mortgage affordability is expected to improve for first-time buyers as lower rates translate to reduced borrowing costs.
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Urban rental prices are anticipated to rise faster than home prices, posing challenges for new buyers.
Major Takeaways:
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The housing market is seeing a gradual recovery in demand, though affordability remains a concern for first-time buyers.
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The BoE’s rate cut path is likely to be gradual, with one cut per quarter, supporting economic growth and easing borrowing costs.
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Experts cite limited housing supply and strong urban rental demand as key factors driving price trends.
Important Points:
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The government’s housing targets may be unrealistic due to capacity and profit constraints among major builders.
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Rental prices are expected to outpace home price growth, especially in cities.
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Ongoing regulatory changes and tax adjustments could further impact landlords and the rental market.
This outlook highlights a cautious but optimistic trajectory for UK property and mortgage markets, with central bank action set to play a pivotal role in shaping affordability and demand.
Source: Reuters
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