House prices set for modest growth as mortgage rates ease: Connells

Connells Group forecasts modest house price growth across Great Britain over the next four years, as gradually easing mortgage rates help buyers return to the market. However, higher borrowing costs, affordability pressures and political uncertainty are expected to prevent a significant housing market boom.

House prices are forecast to increase by 1.0% in 2026, 1.5% in 2027, 2.5% in 2028 and 2.0% in 2029. Although lower mortgage rates should encourage more households to move, borrowing costs are expected to remain above the levels experienced throughout much of the 2010s, limiting the pace of recovery.

The average mortgage rate paid by a homebuyer rose from 4.14% at the start of the year to 5.22% in October. 

These higher-than-expected mortgage rates delayed the recovery in home moves in 2026, with an estimated 100,000 fewer transactions than anticipated at the start of the year. However, Connells says the impact has been felt more in fewer sales than widespread price falls. 

House prices across Great Britain are still rising, but more slowly as higher borrowing costs and taxes stretch buyers’ budgets. The latest ONS House Price Index, which Connells Group uses as the basis for its forecasts, shows the average house price rose by 0.8% year-on-year across Great Britain in August, compared with 1.9% in August 2025.  

So far, higher borrowing costs have prompted more people to put moves on hold rather than leading to widespread price falls. Wages are still growing, and there are few signs of large-scale job losses, helping households manage their finances. 

Against this backdrop, Connells Group forecasts house prices across Great Britain to end 2026 1.0% higher than a year earlier, although prices will vary considerably across the country.

Lower mortgage rates should help households resume postponed moves from 2027, but borrowing costs are expected to remain above the levels seen for much of the 2010s, limiting both buyers’ budgets and price growth. 

By 2028, inflation is expected to be close to the Bank of England’s target, creating more scope for interest rate cuts. Lower mortgage rates should improve buyers’ budgets and let more moves delayed by higher borrowing costs go ahead. 

Connells Group forecasts house price growth of 2.5% across Great Britain in 2028, the strongest year of the forecast period. However, even at this point, growth is expected to remain modest rather than mark the start of another boom.

The outlook for home moves follows a similar path - a gradual improvement as mortgage costs ease, rather than a sharp rebound in activity. 

Completions across Great Britain are expected to edge higher in 2027, reaching around 1.1 million as lower mortgage rates encourage some households to revisit postponed moves.  Activity is forecast to pick up further in 2028, to just under 1.2 million, before easing back to around 1.1 million in 2029 as election uncertainty weighs on demand.

Aneisha Beveridge, research director at Connells Group, said: “The pick-up in home moves many expected this year hasn’t materialised. Instead, transactions have fallen as higher mortgage rates squeezed buyers’ budgets and dented confidence, leaving activity around 100,000 below our expectations at the start of 2026. But fewer moves have not translated into widespread price falls. Wage growth has helped support household affordability, while inflation has done much of the heavy lifting by reducing house prices in real terms. 

“Looking ahead, lower mortgage rates should gradually give more people the confidence and financial room to move. But if rates remain around 5%, the risk of small house price falls in 2027, rather than growth, increases significantly. 

“By mid-2027, the final wave of households on cheap five-year fixes taken out before rates began to rise will be refinancing. Higher repayments will still stretch budgets, but the refinancing shock that has weighed on confidence and activity should start to fade. We expect house price growth to build in 2027 and 2028, although mortgage repayments and moving costs will continue to hold some households back. 

“London should return to growth, particularly in Outer London, but higher taxes and weaker investor and international demand will constrain its recovery. More affordable markets, including Scotland and the North East, are better placed to lead price growth. Government policy has supported first-time buyers and the lower end of the market, while stamp duty and other tax barriers will continue to weigh on the mainstream and prime markets.”