As of mid-September 2025, the UK housing market is navigating a period of cooling price growth and cautious sentiment even as interest rates begin to ease. House prices are broadly stable at record-high levels but annual growth has slowed to low single digits. Buyer demand remains subdued and supply of homes for sale has increased, tilting conditions in favor of buyers.
The Bank of England’s recent rate cuts have started to stabilise mortgage costs, improving affordability modestly, but the full benefits are yet to be felt. Looming fiscal policy decisions, including a major Autumn Budget, are creating uncertainty, especially for higher-end and buy-to-let segments.
Meanwhile, the rental market stays under pressure with strong tenant demand outpacing a dwindling supply of lettings. Overall, the market’s “cautious optimism” reflects stabilising financial conditions tempered by unanswered questions on taxes and economic policy.
House Prices Plateau as Growth Slows
After booming in 2021–2022 and then
cooling through 2024, UK house prices have largely
flatlined in 2025.
Halifax reports that the average UK house price in August hit a
record £299,331, rising
0.3% on the month, the third consecutive monthly upticktheguardian.comtheguardian.com. Annually, prices are up only about
2.2%,
a sharp comedown from the 4-5% year-on-year gains seen at the end of last yearreuters.com.
Rival index
Nationwide actually recorded a
0.1% dip in August (its annual house price growth slowed to
2.1% from 2.4%)reuters.com. In essence,
price growth has slowed to a crawl, with nominal prices just about keeping pace with general inflation. Many surveyors are now seeing outright price declines locally, the
RICS price balance fell to –19 in August (meaning more respondents seeing price drops than rises), the weakest reading since early 2024reuters.com.
This indicates that while
headline prices remain high,
discounting and softening are occurring under the surface in many areas.
Regional trends underscore a very mixed picture.
According to Halifax,
Northern Ireland leads with prices
+8% year-on-year, and
Scotland is up ~5%theguardian.com.
London and Southern England are essentially flat: London values rose under 1% annually on Halifax’s indextheguardian.com, and the South West actually saw a
0.8% decline over the past year, the first region to post an annual drop in house prices since mid-2024theguardian.com.
The divergence reflects local demand and post-pandemic market adjustments. Notably, a 100% council tax premium on second homes in Cornwall (introduced in April) has been cited as one factor pulling down values in the South Westtheguardian.com. By contrast, many more affordable regions (North of England, parts of the Midlands) are still seeing modest price gains.
Overall, however,
nationwide house price indices are effectively flat in real terms, a clear sign that the market has lost momentum and transitioned from the rapid growth of recent years to a period of
price stability or slight correction.
Forecasters have accordingly trimmed their expectations.
Property consultancies that once predicted solid growth have revised their outlooks significantly downward. For example,
Savills is now forecasting just
+1% house price growth in 2025, down from a 4% growth forecast earlier in the yearmoneyweek.com.
Similarly,
Knight Frank in its latest update projects only
+1% for UK prices in 2025, a downgrade from 3.5% forecasted in the springknightfrank.co.ukknightfrank.co.uk.
Rightmove, which monitors asking prices, has halved its 2025 forecast from 4% to
2% growthmoneyweek.com.
These muted projections reflect the impact of higher mortgage costs in late 2024/early 2025 and the current cautious climate. On the ground,
estate agents note that pricing correctly is paramount, homes are still selling if priced competitively, but there is little room for ambitious asking prices.
Indeed, many sellers have had to accept reductions: roughly
one-third of listings nationally are now offered at a discount to their original asking price, one of the highest proportions on record for this time of yearwillowprivatefinance.co.uk.
The
upshot is a gentler market: prices are no longer surging, nor crashing, but drifting gently lower in inflation-adjusted terms. For prospective buyers, especially
first-time buyers, the absence of further rapid price inflation is a welcome shift that could improve long-term affordability as wages (gradually) rise faster than house pricesmoneyweek.com. (For more on how deposit size and rate changes affect first-time buyer affordability, see our guide
first-time buyer mortgages in 2025.)
Buyer Demand Subdued, Supply on the Rise
Buyer demand in the UK property market remains
fragile and tepid as we head into autumn.
The latest
RICS Residential Market Survey shows new buyer enquiries falling for the second month in a row in August a net balance of
–17% of agents reported lower demand, a sharp drop from –7% in Julyreuters.com. Agreed sales are also trending down, with RICS’s sales metric at –24 (meaning more agents seeing sales volumes decrease)reuters.com.
This aligns with what agents are reporting anecdotally: fewer people are house-hunting compared to the post-pandemic frenzy, and those who are looking tend to be
highly price-sensitive and cautious.
“With buyer demand easing and agreed sales in decline, the housing market is clearly feeling the effects of ongoing uncertainty,” notes the RICS chief economist, citing concerns about the economic outlook and the future path of interest ratesreuters.com. Would-be buyers are taking their time, negotiating hard, or postponing moves in the face of rising living costs and uncertainty about where rates and policies will land.
At the same time, the
supply of properties for sale has increased, tipping the balance in favor of buyers in many areas.
Multiple indicators show more homes on the market now than a year ago. Knight Frank data, for example, shows the number of new sales listings
+6% year-on-year (in the year to August), even as new buyer registrations were
8% lower,
an imbalance that has led to a buildup of stockknightfrank.co.ukknightfrank.co.uk.
In fact, total available housing inventory on the market is at its highest level in roughly a decade, according to industry reportswillowprivatefinance.co.uk.
This
glut of listings means buyers have more choice and can afford to be selective. Many sellers who tested optimistic pricing have found their properties lingering unsold and have had to
cut asking prices to stimulate interest. In June, roughly 41% of prime London properties sold had been reduced from their initial pricewillowprivatefinance.co.uk, and similar patterns are evident across the broader market.
Recent Rightmove data showed that
sales agreed picked up in July to the highest summer level since 2020 after sellers
trimmed asking prices more aggressively than usual for the seasonreuters.com. In other words, realistic pricing sells homes. Buyers currently expect, and are often obtaining, discounts of on the order of 5–10% off peak 2022 values in many areas. Those sellers who remain
in denial of the market cooldown risk seeing their homes stagnate with few viewings.
Why has supply surged?
Partly it’s a
hangover from policy changes and uncertainty earlier in the year.
There was a rush of listings around April 2025 tied to tax changes, notably, the government hiked the stamp duty surcharge on second homes and investment properties from 3% to 5% in April, prompting some landlords and second-home owners to list properties before and after that deadlineknightfrank.co.uk. Additionally, a general election (and its aftermath) delayed some listings from 2024 into 2025, and now that pent-up supply has emergedknightfrank.co.uk.
Landlords have also been
offloading properties due to a much tougher environment (higher mortgage rates, phased-out tax reliefs, and looming new regulations in the rental sector), adding to resale supplyknightfrank.co.uk.
In short,
demand has fallen at the same time supply has risen, a recipe for softer prices and longer sales times.
The average time to secure a buyer has stretched to around 10–12 weeks in many regions, versus 6–8 weeks during the 2021 boom. This slower market tempo has given rise to some creative strategies: sellers with urgent needs are more willing to consider chain-breaking solutions, and some buyers are turning to
bridging finance to act quickly on opportunities. (For example, at auction or when a chain threatens to collapse, a short-term
bridging loan can facilitate a fast purchase, see our article
unlocking capital with bridging loans, allowing the buyer to then refinance or sell another property afterward.)
Overall, well-positioned buyers, those who have their
mortgage Agreement in Principle, a flexible financing plan, or no chain, now have
improved negotiating power in this environment of subdued competition. The autumn months are likely to see continued modest activity as buyers await clearer signals on interest rates and the upcoming Budget before fully committing.
Mortgage Rates and Financing: Light at the End of the Tunnel
Interest rate expectations have shifted dramatically in 2025, and the
mortgage market is gradually adjusting.
After an unprecedented series of rate hikes in 2022–2023, the
Bank of England pivoted to rate cuts this year as inflation pressures eased. The BoE implemented a
quarter-point base rate cut in May and another in August, bringing the base rate down to
4.00% (from a peak of 4.50% earlier)willowprivatefinance.co.ukwillowprivatefinance.co.uk.
This marks a clear end to the tightening cycle and the beginning of monetary easing. Crucially, it signals to borrowers that
the peak of expensive borrowing is behind uswillowprivatefinance.co.ukwillowprivatefinance.co.uk.
However, the impact on
mortgage costs has been
slow and somewhat uneven. Lenders and financial markets had already anticipated the BoE’s policy reversal to a large extent, much of the “good news” of lower base rates was priced in ahead of timewillowprivatefinance.co.uk. Over the spring and early summer, banks and building societies did trim their fixed mortgage rates significantly. The average 5-year fixed rate fell to about
5.0% by early August, down from over 6% last autumnwillowprivatefinance.co.ukwillowprivatefinance.co.uk.
In fact, for the first time since 2022, multiple high street lenders began offering headline
5-year fixes under 4% to attract low-LTV, high-quality borrowerswillowprivatefinance.co.uk. These moves sparked hope of a broader “price war” among lenders, and
mortgage approvals picked up to a six-month high in July as some buyers took advantage of improved dealsreuters.com.
Yet in recent weeks,
mortgage rates have fluctuated again.
Paradoxically, after the BoE’s August rate cut, several major lenders
increased certain fixed-rate deals in late August and early Septemberwillowprivatefinance.co.ukwillowprivatefinance.co.uk.
According to Moneyfacts data, the average 5-year fix edged up from about 5.00% at the start of September to ~5.1% by mid-September, reversing a small portion of the summer improvementwillowprivatefinance.co.uk. The culprit was a rise in longer-term funding costs, swap rates and bond yields ticked upward due to global economic trends, outweighing the base rate reduction in the short termwillowprivatefinance.co.ukwillowprivatefinance.co.uk.
This is a reminder that
fixed mortgage pricing is tied more to market expectations of future rates than to the current base ratewillowprivatefinance.co.uk. As one industry analyst put it, much of the BoE’s easing was already “baked in,” and lenders are now watching for signs of how quickly inflation will fall.
The
good news is that inflation is on a downward trajectory (3.8% in July, forecast to peak around 4% and then decline) and most economists believe the BoE will
cut rates further in the coming quartersreuters.comreuters.com. Futures markets are pricing in at least one more 0.25% cut by year-end 2025 or early 2026willowprivatefinance.co.uk. So, barring any surprise resurgence in inflation, the outlook is for
stable or gently falling interest rates,
a stark contrast to the rapid hikes buyers experienced in 2023.
For current and prospective mortgage borrowers, the environment, while still challenging, is
slowly improving.
The typical standard mortgage rates remain higher than the ultra-low levels of the late 2010s, but they are lower
than a year ago and appear to have
plateaued. As lenders gain confidence that the rate cycle has decisively turned, we are seeing a gradual easing of credit conditions.
High street banks have restarted competition for market share: some have loosened their affordability stress tests a bit (for example, lowering the assumed rate used to test applicants’ finances) and reintroduced products that were pulled during the height of rate volatilitywillowprivatefinance.co.ukwillowprivatefinance.co.uk.
A few lenders are even
raising income multiples for certain low-risk borrowers, niche providers have launched mortgages allowing
6× or 7× income on long-term fixed deals for top-earners in secure jobswillowprivatefinance.co.ukwillowprivatefinance.co.uk.
While those cases are exceptions, they indicate a more accommodative stance creeping back alongside the rate cuts. As one mortgage broker noted, “The era of ever-rising mortgage costs has peaked, and banks are vying for business as borrowing costs drift lower.”willowprivatefinance.co.uk Borrowers with strong applications (e.g. good credit, solid income, larger deposits) are now in a position to
negotiate better deals or ask their broker to shop around aggressively.
Remortgaging activity is expected to surge this autumn as many homeowners come off 2 or 5 year fixes taken out in 2018–2021 (when rates were extremely low). These borrowers face significantly higher payments, but they also benefit from a more stable outlook now than even 6 months ago.
Lenders are keen to retain or win customers in this segment, often offering product transfer rates well below their SVR (Standard Variable Rate). If you’re one of these homeowners,
now is the time to explore remortgage options, whether locking in a fixed rate to gain certainty or going variable/tracker to ride rates down further. (For a detailed look at refinancing strategies in the current climate, including managing
interest-only loans reaching maturity, see our article remortgaging interest-only mortgages in 2025)
The key is to
plan early and not simply roll onto a lender’s high SVR, as thousands of pounds per year are at stake.
We also see some savvy borrowers taking advantage of
offset mortgages to mitigate interest costs, this can be especially powerful for those with substantial savings.
In an offset loan, savings effectively earn a tax-free return by reducing your mortgage balance on which interest is charged. Such products have grown in popularity among landlords and high-net-worth individuals in 2025, as they offer flexibility to
keep liquidity while lowering interest paymentswillowprivatefinance.co.ukwillowprivatefinance.co.uk. (Our guide
offset mortgages for landlords in 2025 illustrates how investors use offsets to boost net rental yields)
For
buy-to-let investors, the financing landscape remains tricky but manageable with the right approach.
Many landlords saw their mortgage costs jump this year as cheap fixed rates expired. While the BoE’s recent cut to 4.0% is welcome,
rental mortgage rates are still around 5–6% for many borrowers, which, combined with stricter stress tests, has squeezed profitabilitywillowprivatefinance.co.ukwillowprivatefinance.co.uk.
In response, we’re seeing landlords
restructure loans and portfolios: some are extending mortgage terms or switching to
interest-only to improve cash flowwillowprivatefinance.co.uk, while others are
incorporating (or already operate through) limited company structures to maximize tax efficiency under new ruleswillowprivatefinance.co.uk.
Portfolio landlords often stagger their remortgages now, refinancing some properties immediately, while holding off on others in case rates improve furtherwillowprivatefinance.co.uk. This kind of active portfolio management is becoming the norm. (For landlords evaluating their next steps, our recent blog on
remortgaging buy-to-let properties in 2025 provides strategies to navigate higher rates and protect yieldswillowprivatefinance.co.ukwillowprivatefinance.co.uk.)
Overall, lenders are still lending on buy-to-let, but they are pickier, expecting higher rents relative to the loan, or requiring more equity, so specialist advice is key to secure the best terms.
Lastly, it’s worth noting that
private banks and specialist lenders remain an important part of the financing mix, particularly for high-net-worth and complex borrowers. In this period of tighter mainstream lending criteria, private banks continue to offer bespoke solutions, for example, mortgages underwritten against an individual’s
total wealth and investment portfolios rather than just salarywillowprivatefinance.co.ukwillowprivatefinance.co.uk.
These banks might accept foreign income, consider vested stock or trust assets, or offer interest-only facilities with no fixed amortisation, in ways high-street lenders would not. They often look at the “bigger picture” of a client’s assets and liquidity when approving high-value loanswillowprivatefinance.co.uk. Such flexibility comes with relationship requirements (many private banks ask clients to hold assets under management), but it has enabled continued activity at the
top end of the property market despite tax changes.
Wealthy buyers who don’t fit the standard mold (say, entrepreneurs with irregular income, or overseas investors) are leveraging these channels. If anything,
2025’s market has reinforced the value of specialist finance: when the environment shifts, having more options can make the difference in seizing an opportunity. (For example, see
how private banks are underwriting mortgages in 2025 based on asset-backed lending, a method that has grown in prominence as traditional affordability tests tightenedwillowprivatefinance.co.ukwillowprivatefinance.co.uk.)
Bottom line:
Mortgage rates have likely
peaked and should inch down further into 2026, which is a relief for borrowers.
The current average rates (5%) are still high relative to the ultra-low era, but the direction of travel is favourable.
Coupled with the recent softening in house prices, the
affordability outlook is set to gradually improve, a potential turning point for buyer confidence heading into next yearmoneyweek.com.
That said, the recovery will be incremental.
Both borrowers and lenders remain alert to economic data. We advise anyone looking to purchase or refinance to stay
proactive, get advice on your
best mortgage options (fixed vs tracker, offset accounts, etc.) in this new rate regime, and consider securing offers in advance. Many lenders allow mortgage offers to be secured 6 months ahead, which can lock in a rate and provide peace of mind amid lingering volatility. The
window for opportunity, to refinance on better terms, or to buy with less competition, appears to be opening.
Fiscal Policy Uncertainty Weighs on Sentiment
A major factor hanging over the property market this autumn is
uncertainty about fiscal policy and potential changes in taxes impacting real estate.
The UK has a new government as of early 2025, and the first full
Budget under Chancellor Rachel Reeves is scheduled for 26 November 2025reuters.comreuters.com. In the run-up, there is intense speculation about what measures this Budget might include to address public finances and the housing sector.
Talk of possible tax increases,
especially aimed at wealth and property, has introduced a note of caution in the market, particularly at the upper end. The
RICS survey notes that some buyers (and sellers) are sitting on their hands due to concerns that
property taxes on expensive homes could rise in the Budgetreuters.comreuters.com.
It is not yet clear what form this could take (e.g. raising Stamp Duty further for high-value properties, changes to Capital Gains Tax on second homes, or new annual property levies), but even the rumor of such measures can sideline high-end buyers. Knight Frank analysts similarly observed that
“pre-Budget nerves” over the summer kept demand in check in prime markets, as speculation swirled about possible changes to non-dom status, capital taxes, and other wealth measuresknightfrank.co.ukknightfrank.co.uk. Indeed, after years of relative stability, the confluence of a new government and the need to shore up public finances has made property investors more skittish about policy risk.
We’ve already seen
concrete policy changes in 2025 that have impacted the market.
As mentioned, April brought a higher Stamp Duty surcharge for additional properties (5% up from 3%), which immediately cooled investor and second-home purchase activityknightfrank.co.uk. The new government also enacted reforms to the remittance basis and
non-domiciled (“non-dom”) tax status, which reduce the tax advantages for wealthy foreign residents in the UKknightfrank.co.ukknightfrank.co.uk. This has reportedly led some overseas owners to
sell London properties or hold off on purchases, contributing to the slower prime London marketknightfrank.co.ukknightfrank.co.uk.
Looking ahead, the
Renters’ Reform legislation (aimed at abolishing Section 21 “no-fault” evictions and implementing stricter rental standards) is on the agenda, a factor that is already prompting more landlords to exit, as evidenced by the sharp drop in landlord instructions in the rental marketreuters.com.
Additionally, environmental standards like
EPC requirements are set to tighten in coming years, meaning landlords face hefty upgrade costs or fines if they don’t improve their properties’ energy efficiency. The cumulative effect of these measures is an atmosphere of
policy flux. Property investors, whether a single BTL landlord or the owner of a £10m townhouse, are trying to anticipate a moving target.
Until the November Budget is delivered and details are known, this
fiscal ambiguity will likely restrain market activity.
Buyers are factoring in a margin for potential tax changes in their offers, or postponing big decisions.
For instance, an upsizer eyeing a £2 million home might wait to see if Stamp Duty is increased for £2M+ transactions, which could save them tens of thousands if they delay. Some sellers, too, are hurrying to complete sales
before any new taxes arrive (for example, there’s talk that overseas buyers could face higher levies, spurring a few to transact now rather than 2026).
The
Autumn Budget’s content will be pivotal: measures that favor housing (such as new first-time buyer reliefs, or investment in housing supply) could boost sentiment, whereas anything that increases the tax burden on homeowners or landlords could prolong the slump in demand.
Notably, the Chancellor has also emphasized helping the BoE fight inflationreuters.com, which suggests fiscal policy won’t be overly expansionary, i.e. no big stimulus that could unexpectedly lift the market, but also an effort not to worsen inflation (which might actually reassure rate-setters and keep mortgage rates on the downward track).
In the
best case, clearer fiscal direction by year-end could unlock some pent-up transactions in early 2026 as buyers and sellers gain confidence to proceed. Until then,
uncertainty = caution.
One bright spot is that
any major house price correction seems unlikely partly because the government (regardless of party) has incentives not to let the market slide too far. Housing is often called “the UK’s favorite asset class,” and history has shown that significant drops tend to spur policy responses (stamp duty holidays, Help to Buy schemes, etc.).
Already, industry groups are lobbying for measures in the Budget to support housing, such as reintroducing tax relief for landlords or launching new schemes to assist first-time buyers.
Whether such proposals will be adopted is unclear, but it does mean
policymakers are aware of the market’s fragility. In the meantime, those in the market should keep an eye on the news from Westminster. We recommend staying informed through reputable sources, for example, our Willow Private Finance blog will cover the
Budget’s impact on interest rates and mortgages as soon as details emerge.
If you’re concerned about potential changes (tax hikes on additional properties, inheritance implications, etc.), consider consulting with a property tax adviser or mortgage broker now to game-plan scenarios. Sometimes there are options to mitigate a tax impact (such as transferring a property into a company or trust, or accelerating a purchase) if you act
before rules change.
In summary, the current policy haze is causing a “pause” in parts of the market, but by early 2026 we should have a much clearer landscape, one way or another, which will allow normal activity to resume at a steadier clip.
Rental Market Stays Tight as Landlords Pull Back
The
rental market continues to experience
intense pressure, with
demand far outstripping supply in many areas.
Even as house price growth slows, rents are still climbing to new highs, adding to the cost-of-living strain for tenants across the UK. According to Rightmove’s Q3 data, the
average asking rent for newly listed rentals reached a record
£1,577 per month, about
3% higher than a year agoreuters.com.
While this annual rent growth is a bit slower than the double-digit surges seen in 2022, it remains well above long-term averages and is painful for tenants already facing high inflation elsewhere.
Moreover, the Rightmove figure is a national average, many regions (and especially specific cities like London or Manchester) have seen much larger rent hikes.
In fact,
rents in London’s prime districts are up ~5–6% year-on-year as of summer 2025willowprivatefinance.co.uk, and roughly
35% above pre-pandemic levelswillowprivatefinance.co.uk. Such increases reflect a
perfect storm of rental demand: the return of students and young professionals to cities, immigration growth, and frustrated would-be first-time buyers who are delaying purchases and renting longer. At the same time,
rental supply has diminished as more landlords sell off properties or move into short-term lets. The latest RICS survey found landlord instructions (new rental listings) fell at the fastest pace since early 2020, with a net
37% of agents reporting fewer rental properties availablereuters.com. This is an even steeper decline in supply than seen earlier in the year and underscores that
landlord exodus is ongoingreuters.com.
The imbalance is thus still worsening:
tenant demand is net positive (around +24% on RICS’s index) while rental supply is net negative, and as a result
rent expectations among surveyors hit a net +27%,
meaning a strong majority expect rents to
rise further in the next three monthsreuters.com.
In plain terms, most experts foresee
continued upward pressure on rents into late 2025. This pressure is most acute in urban centers and desirable commuter areas, where competition for good rental homes is fierce. Many prospective tenants face bidding wars or are offering above asking rent to secure a property (much as buyers did for homes during the 2021 boom).
The
rental affordability crunch is a growing social issue, with an increasing share of income spent on rent for especially younger households. There are early signs that extremely high rents are prompting some tenants to make different choices, for instance, moving further out of city centers, or in some cases even deciding to buy if they can, since monthly mortgage payments (with a roommate or partner) might rival rent.
Indeed, the
silver lining for first-time buyers is that the combination of flat house prices and slightly easing mortgage rates, relative to surging rents, is improving the buy-versus-rent math.
“Affordability should improve gradually if income growth continues to outpace house price growth,” notes Nationwide’s chief economist, adding that easing borrowing costs will
“support buyer demand” in the medium termmoneyweek.com. In other words, as soon as aspiring buyers can comfortably afford a mortgage, many will gladly leave the expensive rental market, which in turn could relieve some rental demand. But that relief likely lies further ahead; in the immediate term, renters will continue to feel the squeeze.
From the landlord’s perspective, those
remaining in the market are adapting strategies to cope with higher financing costs. Many landlords have been able to push through above-inflation rent rises on tenancy renewals, which helps offset higher mortgage interest (where tenants can absorb it). Some are
investing in improvements (like energy efficiency upgrades) to justify higher rents or to meet incoming regulations, sometimes financing these improvements via
remortgaging to pull out equitywillowprivatefinance.co.uk or using specialised loans (e.g.
bridging or development finance for conversions).
Others, particularly
cash-rich landlords, are leveraging tools like
offset mortgage accounts to park spare cash and reduce interest burdens month-to-monthwillowprivatefinance.co.uk. (Offset mortgages have gained traction as they also carry tax benefits, interest saved is not taxed as savings interest would bewillowprivatefinance.co.uk, a perk now that standard BTL mortgage interest is not fully deductible.) Additionally, there’s a noticeable shift of rental properties into
corporate structures (SPVs) for tax purposeswillowprivatefinance.co.uk, and the use of
portfolio mortgages to consolidate and manage debt more flexibly across multiple propertieswillowprivatefinance.co.uk.
These trends indicate a professionalization of the segment: casual or highly leveraged landlords are the ones most likely to exit, while more
sophisticated investors find ways to make it work,
often with the guidance of specialist brokers and lenders.
Government policy will be key for the future of the rental sector. If the promised reforms (e.g. abolishing Section 21) are implemented in a landlord-friendly way (with adequate provisions for serious tenant faults, etc.), and if there are incentives for providing rentals (such as possible capital gains reliefs for longer-term landlords, or new build-to-rent development support), we could see supply stabilise. Conversely, any additional burdens (like rent caps or new taxes on rental income) could accelerate the landlord retreat, worsening the rental shortage. As of now, the
trend is fewer rental properties chasing more tenants, which likely means
higher rents ahead in 2026reuters.com ,
albeit moderated by what tenants can actually afford to pay.
For those renting, it’s critical to
budget for potential rent increases and explore options such as locking in longer tenancies (some landlords may agree to 18-24 month leases to provide stability), or negotiating increment clauses.
And for those contemplating buying their first home to escape renting, the current market slowdown presents improved conditions:
more choice, less competition, and the ability to negotiate on price. If you’ve saved a deposit and have your finances in shape, late 2025 into 2026 could be an advantageous window to purchase, before interest rates potentially fall further (which could reignite buyer competition). Our article,
First-Time Buyer Deposits in 2025 guide, breaks down how different deposit sizes affect your rates and borrowing power, a useful read for anyone planning that leap.
In any case, the rental market’s pain is the sales market’s potential gain: the higher rents climb, the more attractive homeownership becomes when feasible.
Outlook: A Stabilising Market Poised for a Pick-Up?
Summing up the current landscape, the
UK property market in mid-September 2025 finds itself at an
inflection point.
On one hand, we have clear signs of a
market cooldown,
house price growth has dwindled to near-zero, demand is muted, and sellers must negotiate harder to get deals done.
On the other hand,
foundational conditions are starting to improve, interest rates are stabilising (with genuine prospects of further cuts), inflation is coming under control, and real incomes are gradually ticking up.
The market is essentially
catching its breath after the frenetic activity and rapid price escalation of the early 2020s.
This pause is not necessarily unhealthy; in fact, it’s
restoring balance and affordability to some extent. Importantly, we are not seeing a dramatic crash in prices or a wave of forced sales, thanks to prudent lending in recent years (affordability stress tests) and a strong labour market,
distressed selling remains very low. Most homeowners can weather the higher mortgage rates, and with unemployment still around 4%, the feared spike in repossessions has not materialised.
This puts a floor under how far prices are likely to fall. Indeed, Savills and Knight Frank both foresee
modest price growth resuming in 2026 (on the order of 2–3%) as the economy stabilisesknightfrank.co.uk.
The biggest
near-term swing factor is confidence. Cautious optimism is present but not yet pervasive, it’s being held back by the uncertainty around government policy and the desire to see definitive evidence that inflation is beaten.
By the end of this year, we should have much more clarity: the Autumn Budget will be done, additional BoE meetings will indicate the path of rates (the next MPC decision on 18 September and then in November and December will be watched closely), and the trajectory of the economy (whether the UK can avoid a recession amid global headwinds) will be clearer.
If these factors resolve favourably, say, no major housing tax surprises in the Budget, and continued declines in inflation allowing another BoE cut, we could see
pent-up demand release in 2026. There are signs of this pent-up demand: mortgage approvals, while low, have ticked up; many buyers who paused their searches in 2023/24 still have genuine housing needs (growing families, relocations, etc.) and won’t wait forever. Historically, periods of flat or falling prices often
create future spurts of activity as soon as people feel the bottom has been reached.
For
sellers, the strategy in the coming months should be realism and patience. The market is price-sensitive, but well-presented, well-priced homes are selling, often after slightly longer time on market and some negotiation. As spring 2026 approaches, conditions may turn in sellers’ favor if buyer confidence returns, so not every seller needs to rush; however, those who need certainty now should price to the current market, not last year’s.
For
buyers, the next 6–12 months could be a window of relatively low competition and improved choice, essentially a
“buyer’s market”. Acting during this window, before any significant uptick in demand, could enable securing a home at a fair (or even discounted) price, with the knowledge that your mortgage rate is likely to only get better if you refinance down the line.
We encourage prospective buyers to
get their finances “market-ready” (speak to a broker about how much you can borrow given the latest rates, get an Agreement in Principle, and ensure your deposit is readily accessible).
Also, consider
creative options: for example,
offset mortgages, which we discussed, can be a great fit if you have substantial savings, or a
guarantor mortgage might help some first-timers boost affordability (certain lenders now offer 100% LTV loans with family support).
Our team at Willow Private Finance has also been assisting clients with
bridging loans to facilitate tricky chains or downsizing moves, a reminder that even in a cooler market, there are solutions to keep transactions moving. (See
bridging finance options in 2025 for fast funding scenarioswillowprivatefinance.co.ukwillowprivatefinance.co.uk.)
In closing, the
mid-2025 UK property market can be characterized by
“stabilising rates, softer prices, and budget uncertainty,” as our title suggests.
Each of these elements carries the seeds of a future market direction.
Stabilising rates and falling inflation sow the seeds of improved affordability and demand, a reason for optimism.
Softer prices and greater supply sow the seeds of opportunity for those ready to buy, a healthier affordability picture than we’ve seen in years.
And
budget uncertainty, while currently a dampener, will soon give way to actual policy which, we hope, will not only avoid harm, but possibly introduce measures to help housing (for example, incentives for
first-time buyers or for
greener homes). Seasoned property observers know that markets often turn when sentiment shifts from fear to confidence.
We’re not quite there yet, but the pieces are falling into place for a
potential market pickup in 2026. Until then, our advice is to stay informed, stay flexible, and take advantage of the current lulls to position yourself, whether that means refinancing to a cheaper deal, or negotiating hard on that dream home price. The property market is cyclical, and after a period of cooling, the
foundations for the next phase,
with more stable growth, are quietly being laidmoneyweek.comknightfrank.co.uk. That is cautious optimism indeed, but optimism nonetheless.
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