Housing Market Shows Signs of Stabilisation

The UK housing market is showing encouraging signs of stabilisation after a turbulent 18-month period marked by volatile prices and reduced transaction volumes. Average house prices have remained relatively flat over the past three months, while buyer enquiries and mortgage approvals are beginning to recover.

This stabilisation comes as welcome news for both buyers and sellers who have been navigating one of the most challenging property market environments in recent memory. With mortgage rates appearing to plateau and economic uncertainty diminishing, market conditions are gradually returning to more normal patterns.

Price Trends Across the UK

The latest data from major property indices shows a marked shift from the rapid price fluctuations that characterised 2024 and early 2025:

National Price Movements

The average UK house price now stands at £285,000, representing a modest 1.2% increase year-on-year – the smallest annual change since 2019. This compares to the dramatic swings of +15% and -8% seen in different periods over the past two years.

"We're seeing a return to more sustainable price growth patterns," explains Dr. Rachel Thompson, Head of Housing Research at Rightmove. "The market is recalibrating after the exceptional volatility of recent years, finding a new equilibrium that reflects current economic conditions."

Regional Variations

Regional markets are displaying varied patterns, reflecting local economic conditions and supply-demand dynamics:

• London: Prices down 2.1% YoY, but showing monthly stability since June
• South East: Flat year-on-year, with increased buyer activity
• North West: +3.2% YoY, leading regional growth
• Scotland: +2.8% YoY, supported by strong local economy
• Wales: +1.8% YoY, benefiting from affordability

Mortgage Market Recovery

Perhaps the most significant factor in the market's stabilisation has been the improvement in mortgage market conditions:

Interest Rate Stabilisation

Average mortgage rates have stabilised around 5.2% for a typical two-year fixed-rate mortgage, down from peaks of over 6.5% seen in late 2024. This plateau has provided much-needed certainty for potential buyers planning their purchases.

"The mortgage market has definitely calmed down. We're seeing more consistent pricing from lenders and improved product availability, which is giving buyers confidence to move forward with their plans."

— Sarah Mitchell, Mortgage Director at Halifax

Lending Criteria Easing

Several major lenders have begun to ease their lending criteria, with some reducing deposit requirements and increasing income multiples for certain borrower categories. This has particularly benefited first-time buyers, who had been largely priced out during the market's most volatile period.

Approval Rates Improving

Mortgage approvals for house purchases rose to 52,000 in August, up from a low of 37,000 in March 2025. While still below the long-term average of 65,000, this represents a clear upward trend that suggests renewed buyer confidence.

First-Time Buyer Renaissance

One of the most encouraging trends has been the return of first-time buyers to the market:

Affordability Improvements

The combination of stabilising prices and improved mortgage availability has enhanced affordability for first-time buyers. The average first-time buyer now needs a deposit of £34,500, down from peaks of over £40,000 in late 2024.

James and Emma Carter, who recently purchased their first home in Birmingham, share their experience: "We'd been saving for years but kept getting priced out. When rates started to stabilise this summer, we finally felt confident enough to make an offer. The whole process felt much more predictable than it did six months ago."

Government Support Schemes

Enhanced government support schemes have also played a role in the first-time buyer recovery:

• Help to Buy: Extended with higher property value limits
• Shared Ownership: Expanded eligibility criteria
• Mortgage Guarantee Scheme: Renewed with improved terms

Transaction Volumes Recovering

Property transaction volumes, which had fallen to multi-decade lows, are showing signs of recovery:

Sales Agreed Increasing

Estate agents report a 18% increase in sales agreed since June, with the autumn market showing more activity than many had predicted. The number of properties under offer has risen to levels not seen since early 2024.

Mark Thompson, Managing Director of a large estate agency chain, observes: "There's definitely more confidence in the market. Buyers are coming back, and sellers are being more realistic about pricing. It feels like we're getting back to a more normal market dynamic."

Time to Sell Reducing

The average time to sell a property has decreased from 147 days in early 2025 to 98 days currently, suggesting improved market liquidity and buyer demand.

Build-to-Rent Sector Growth

The stabilisation of the sales market has been accompanied by continued growth in the build-to-rent sector:

Institutional Investment

Institutional investors have committed over £8.2 billion to build-to-rent developments in 2025, recognising the stable rental yields and growing demand for professional rental accommodation.

Rental Market Dynamics

The rental market continues to show strength, with average rents up 6.8% year-on-year. However, the rate of increase has slowed from double-digit growth seen in 2024, suggesting this market is also finding a new equilibrium.

Regional Spotlight: Market Leaders

Several regions are emerging as leaders in the market recovery:

Manchester and the North West

Manchester continues to attract buyers with its combination of strong economic growth, relatively affordable prices, and excellent transport links. New developments in the city centre are seeing particularly strong sales rates.

Edinburgh and Glasgow

Scottish cities are benefiting from their relative affordability compared to London and the South East, attracting both domestic buyers and investors seeking better value.

Bristol and Bath

The South West corridor continues to appeal to buyers seeking quality of life improvements, with tech companies' expansion into the region supporting employment growth.

New Build Market Dynamics

The new build sector is showing particular signs of recovery:

Housebuilder Confidence

Major housebuilders report increased sales rates and reduced cancellation rates, with some beginning to increase production capacity for 2026 delivery.

Construction starts have increased by 12% quarter-on-quarter, suggesting builders are responding to improved market conditions by expanding their development programmes.

Planning System Improvements

Streamlined planning processes in several local authorities have helped accelerate development timelines, with the average planning decision time reducing from 16 to 11 weeks in participating councils.

Challenges and Risks

Despite the positive trends, several challenges remain:

Interest Rate Sensitivity

The market remains highly sensitive to interest rate changes, and any unexpected monetary policy shifts could disrupt the current stabilisation trend.

Supply Constraints

Housing supply remains constrained in many areas, particularly in high-demand regions like the South East. This fundamental imbalance could limit the sustainability of price stability if demand continues to recover.

Economic Uncertainty

Broader economic challenges, including inflation concerns and global economic volatility, could impact buyer confidence and market stability.

Expert Predictions for 2026

Industry experts are cautiously optimistic about the market's trajectory:

Price Forecast

Most analysts predict modest price growth of 2-4% for 2026, with regional variations likely to persist. This represents a return to more traditional, sustainable growth patterns.

Transaction Volume Recovery

Transaction volumes are expected to gradually recover towards long-term averages, though this process may take 12-18 months to complete fully.

"We're seeing the foundations for a healthier, more sustainable housing market. The extreme volatility of recent years appears to be behind us, but it will take time for all participants to fully regain confidence."

— Professor David Williams, Housing Economics, Cambridge University

Policy Implications

The market stabilisation has important implications for housing policy:

Planning Reform

The government is using the market stability as an opportunity to advance planning reforms, with several pilot programmes launched to streamline development approval processes.

Affordable Housing

Renewed focus on affordable housing delivery, with £11.5 billion committed to social housing construction over the next three years.

Property market conditions can change rapidly and vary significantly by location. This analysis is for informational purposes only and should not be considered as property investment advice. Always consult with qualified property professionals before making buying or selling decisions.