The UK housing market has defied expectations, maintaining stability amidst rising inflation and uncertain interest rates. Despite the perfect storm of economic headwinds, transaction volumes have held firm, and a significant 14% increase in available properties is offering hopeful buyers more choices than ever before.
Rightmove's analysis paints a mixed picture for property prices, with a notable 0.6% (£2,113) drop in average house prices to £376,191 in June – the largest decline in this month since 2008. This downturn is attributed to broader economic uncertainty, seasonal factors, and an influx of available properties. Colleen Babcock, Rightmove's property expert, stresses that sellers must price competitively from the outset to navigate these challenging conditions.
Inflation, a key market influencer, has remained below 3%, but the looming energy price cap increase from July 2026 is forecast to push inflation up by 0.7% in August. The National Institute of Economic and Social Research predicts that inflation may peak at around 4% in November 2026, with scenarios ranging from a decrease to 2.7% by May 2027 to remaining stable at 3.3%.
The Bank of England's base rate decisions are under close scrutiny amidst these inflation dynamics. Fidelity analysis suggests that base rates could rise to just over 4%, although some forecasters anticipate rates holding steady until inflation subsides. For borrowers, the slight decrease in two-year fixed mortgage rates to 5.07% from 5.18% last month translates to an approximate £30 reduction in monthly payments.
Despite a 10% decline in overall buyer demand, Zoopla reports that sales agreed are 1% ahead of last year, driven largely by committed home movers. First-time buyer enquiries have fallen by 6%, but active buyers are targeting properties valued around £10,000 more than last year. Regional disparities persist, with London and southern regions experiencing flat to negative price growth, while northern regions have recorded growth exceeding 3%, and Northern Ireland leading with 7.8% annual growth.
This resilience in the housing market suggests that determined buyers are proceeding with purchases despite wider economic uncertainties. However, the future trajectory of the market remains closely tied to inflation trends and subsequent interest rate decisions by the Bank of England, as well as geopolitical factors influencing the broader economic outlook.