According to a Reuters poll, British home prices are projected to increase more rapidly than previously anticipated this year, although rental costs are predicted to surge even faster due to high demand outstripping supply. The Bank of England is expected to further reduce the Bank Rate by 75 basis points to 3.75% by year-end, as indicated by a poll of 66 economists by Reuters.
The average British home price is forecasted to rise by 3.5% this year and 4.0% in 2026, supported by lower borrowing costs. In London, home prices are expected to increase by 3.0% in 2025 and 4.0% in 2026.
Estate agency Hamptons' Aneisha Beveridge noted, "The slow downward drift in mortgage rates this year should boost prices and sales volumes," while highlighting that property values will still be constrained by higher taxation and economic challenges.
Rental costs are anticipated to accelerate even faster than inflation, with a 4.0% increase both nationally and in London this year and in 2026. Richard Donnell from property website Zoopla pointed out the supply and demand imbalances in the rental market affecting price growth.
Despite some forecasts of rising inflation, most economists maintained their interest rate projections, suggesting the Bank of England may decrease the Bank Rate to 3.75% by the end of the year.
Analysts mentioned potential impacts from the Labour government's housing initiatives and changes in tax rules on the housing market, which could lead to limited supply for tenants.
While there is a downgrade in growth forecasts for the UK economy, analysts foresee improvements in the purchasing affordability for first-time homebuyers in the upcoming year due to a fall in mortgage rates and stress rates, coupled with rising salaries.