The outlook for the UK housing market has become more subdued, with Zoopla revising down its forecast for housing transactions in 2026. The property portal attributes this adjustment to persistent volatility in mortgage rates and wider economic uncertainty, which continue to dampen buyer confidence and activity.
Richard Donnell, Executive Director at Zoopla, indicated that the number of sales agreed this year is now expected to be lower than initial projections. He highlighted that the latter half of 2025 experienced a particularly weak period for transactions, partly due to uncertainties surrounding the Budget at the time. This recent downturn has been significantly influenced by fluctuating borrowing costs, with average mortgage rates climbing from 4% at the beginning of the year to 5% by April. Such increases have prompted many prospective buyers to delay their purchasing decisions, adopting a 'wait and see' approach as rates have recently begun to decline once more.
Data released by the Bank of England for May 2026 further underscores the market's slowdown. Net mortgage approvals for house purchases decreased to 56,200, falling below the six-month average of 63,300. Similarly, remortgage approvals also saw a notable drop, from 51,200 in April to 33,000 in May. These figures are considered a crucial forward-looking indicator for the housing market, as noted by Jeremy Leaf, a North London estate agent and former RICS residential chairman.
Leaf described the current situation on the ground as not only seeing fewer transactions but also buyers taking considerably longer to commit to their mortgage offers. He pointed to concerns over the future direction of mortgage rates, coupled with ongoing cost of living pressures and geopolitical events, as factors contributing to this delayed decision-making. The current political climate in the UK is also adding an extra layer of caution for potential buyers.
The trajectory for housing sales in the latter half of 2026 will largely depend on the extent to which mortgage rates continue to fall from their present levels. While a downward trend has started, the pace and sustainability of these reductions remain uncertain. This subdued transaction environment contrasts sharply with earlier hopes for a market recovery, with affordability constraints continuing to weigh heavily on activity. Industry experts anticipate that cautious market conditions will persist in the near term, with any significant improvement contingent on sustained reductions in borrowing costs. For first-time buyers, elevated mortgage rates translate to higher monthly repayments, making it harder to get onto the property ladder even with existing schemes like Help to Buy winding down. Existing homeowners may find remortgaging more expensive, while landlords could face challenges if rental yields don't keep pace with increased borrowing costs.
For instance, Rightmove data consistently shows that while asking prices have seen regional variations, the overall sentiment is influenced by affordability. For example, average house prices in London, according to Halifax, remain significantly higher than the national average, making the impact of rate increases even more pronounced for buyers in the capital. Stamp duty remains a consideration for buyers, though the thresholds have seen adjustments in recent budgets to support different segments of the market. The general consensus is that a period of market re-adjustment will continue as economic factors play out.