Savills has revised its UK housing market forecast downwards, now projecting mainstream house prices will decline by 2% in 2026 as elevated mortgage costs continue to suppress buyer demand and affordability.
The property consultancy has lowered its five-year outlook, expecting mainstream UK house prices to rise by 18.5% by 2030, down from a previous forecast of 22.2%. The revised projections reflect a softer near-term market, with higher borrowing costs anticipated to limit transaction levels and constrain price growth in the coming months.
Savills attributes the deteriorating outlook to geopolitical instability in the Middle East and its impact on inflation and mortgage pricing. Higher energy prices have contributed to inflationary pressures, pushing mortgage rates upward and reducing borrowing affordability for households.
Short-term pressures expected
The agency has adjusted its 2026 forecast from 2% growth to a 2% decline, citing affordability constraints as the primary factor shaping market activity. Lucian Cook, head of residential research at Savills, said: “Despite a robust start to the year for both price growth and activity, the rise in mortgage rates since late February has downgraded the short-term outlook. Higher borrowing costs and weaker sentiment will weigh on demand through the remainder of 2026.”
Cook noted that lower demand is being met with elevated stock levels, partially from landlords exiting the market due to increased regulation, which will place downward pressure on prices, particularly in London and the South East. The trend aligns with recent declines in UK property transactions amid broader market uncertainty.
However, Savills expects several factors to cushion the impact. Affordability is less stretched compared with 2022 following a slower price recovery, whilst stricter mortgage regulation and widespread use of fixed-rate mortgages continue to keep the risk of forced sales low. The firm anticipates the most significant pressure on prices will occur over the summer when interest rates are expected to peak.
Five-year forecast and regional variations
Savills projects average house prices will increase by £67,000 over the five years to 2030, with recovery beginning slowly in 2027 before accelerating through the remainder of the forecast period. The agency expects the Bank of England base rate to decline from 3.75% at the end of 2026 to 2.50% by 2030, with average mortgage rates falling from 4.78% to 3.50% over the same period.
Regional performance is expected to vary significantly. The North of England, Scotland and Wales are forecast to outperform during the period of higher mortgage rates, reflecting stronger affordability cushions. Yorkshire and Humber and the North West are projected to see 25% growth by 2030, whilst London is forecast to experience just 10.6% growth over the same period.
Dan Hill, research analyst at Savills, commented: “Regional performance continues to be shaped by affordability. More affordable markets tend to be more resilient when borrowing costs rise, and we expect that to underpin outperformance across parts of the North, Scotland and Wales while mortgage rates remain elevated.”
Further south, Savills anticipates houses will outperform flats amid continued buyer caution around leasehold and building safety concerns. The forecast assumes CPI inflation will reach 3.9% in 2026 before moderating to 2.0% by 2029, with real GDP growth of 6.5% over the five-year period.
Outlook and risks
The main risk to the forecast is a more protracted conflict in the Middle East leading to sharper inflation and interest rate rises. Savills warned this scenario would result in more significant short-term pressure on house prices, followed by a more pronounced V-shaped recovery.
The revised outlook comes as estate agency models continue to evolve in response to changing market conditions. Despite near-term headwinds, Savills maintains the slowdown will be temporary rather than structural, with improving economic conditions and gradually easing affordability pressures expected to support a return to growth over the medium term.