The British housing market has been through an extraordinary period of turbulence since 2020. The pandemic-era "race for space" drove prices to record highs in 2021 and 2022. The mini-budget of September 2022 and the subsequent spike in mortgage rates sent demand plummeting and prices falling in many regions. And then, slowly, something began to shift.
According to the Nationwide House Price Index, UK average house prices rose by 3.9% in the twelve months to February 2026 — the strongest annual growth in two years. The number of mortgage approvals tracked by the Bank of England has returned to pre-pandemic averages. And estate agents across the country are reporting a notable uptick in viewing activity and a reduction in the time properties sit on the market before receiving an offer.
None of this means the housing crisis is resolved. Affordability remains stretched, particularly for first-time buyers in London and the South East. But the signs of stabilisation are real, and understanding what is driving them matters for anyone considering buying, selling, or remortgaging in the near future.
Mortgage Rates: The Critical Variable
The single biggest factor weighing on the housing market since 2022 has been the rapid rise in mortgage rates, which followed the Bank of England's base rate increases from 0.1% in December 2021 to 5.25% by August 2023. At their peak, two-year fixed mortgage rates exceeded 6.5% for borrowers with smaller deposits — a level not seen since the financial crisis of 2008.
Since mid-2024, rates have eased. The Bank of England cut the base rate in stages through 2025, and by early 2026, the typical two-year fixed rate for a 25% deposit borrower had fallen to around 4.1%, with five-year fixes available below 4% from multiple mainstream lenders. This has materially improved affordability calculations for would-be buyers who had been sitting on the sidelines.
Regional Variation
The picture is not uniform across the UK. The strongest growth is being recorded in the North West, Yorkshire and the Humber, and the East Midlands, where affordability ratios remain significantly more favourable than in London. Cities like Manchester, Leeds, and Sheffield are seeing particularly strong demand from first-time buyers priced out of the capital.
In Greater London, the recovery is more muted. High absolute prices, stamp duty thresholds, and the continuing prevalence of leasehold properties with escalating service charges are all acting as headwinds. The luxury end of the London market, however, has been buoyed by international buyers responding to the pound's relative weakness.
Supply Constraints Persist
The fundamental driver of UK house price resilience — inadequate housing supply — remains unchanged. The government's target of 1.5 million new homes over this parliament has been welcomed by industry bodies but is widely regarded as aspirational rather than guaranteed, given the planning system's chronic backlogs and the shortage of skilled construction workers.
The Build to Rent sector continues to grow, particularly in major cities, offering an alternative for households unable to access mortgage finance. But for outright buyers, the supply-demand imbalance in most desirable areas shows no signs of resolving in the short term.
What This Means for Buyers and Sellers
For those looking to buy, the current market offers a more predictable environment than at any point since 2020. Gazumping, which was widespread during the 2021–2022 frenzy, has largely returned to pre-pandemic norms. Buyers have more time to conduct due diligence, negotiate on price, and secure mortgage approvals without the frantic pace of the boom years.
For sellers, realistic pricing remains essential. Properties that launch above local market evidence are sitting longer; those priced in line with comparable sales are generally selling within expected timeframes. The era of accepting any offer at any price ended in late 2022 and has not returned.
The next twelve months will be shaped principally by the Bank of England's rate decisions, the trajectory of wage growth, and whether the government's planning reforms deliver any meaningful increase in new supply. For now, cautious optimism seems the most defensible position.