UK Homes Get a Breather: Prices Set to Climb, BoE Rate Cut on the Horizon

Unknown Apr 02, 2026 1,000 Views

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.

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:

UK home prices are projected to rise by 2.0% in 2025 and 2.8% in 2026, lower than previous forecasts.
The Bank of England is expected to cut rates to 3.75% on December 18, according to all 64 economists polled.
By end-March 2026, two-thirds of economists predict the bank rate will fall to 3.50%.
Mortgage affordability is expected to improve for first-time buyers as lower rates translate to reduced borrowing costs.
Urban rental prices are anticipated to rise faster than home prices, posing challenges for new buyers.

Major Takeaways:

The housing market is seeing a gradual recovery in demand, though affordability remains a concern for first-time buyers.
The BoE’s rate cut path is likely to be gradual, with one cut per quarter, supporting economic growth and easing borrowing costs.
Experts cite limited housing supply and strong urban rental demand as key factors driving price trends.

Important Points:

The government’s housing targets may be unrealistic due to capacity and profit constraints among major builders.
Rental prices are expected to outpace home price growth, especially in cities.
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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