A period of stabilisation is taking shape in the housing market as mortgage rates ease and price growth moderates, though structural affordability issues remain unresolved.

Modest house price growth forecast for 2026, alongside falling mortgage rates, suggests the housing market is moving onto a more stable footing, according to Propertymark.

While this shift is helping to restore confidence among first-time buyers, the organisation warns that property taxation and wider affordability pressures continue to restrict access to homeownership.

Improving market conditions have prompted lenders to trim mortgage rates, easing monthly repayment costs for borrowers.

Propertymark says this has made homeownership appear more achievable for many aspiring buyers, particularly those seeking to buy for the first time after being priced out during recent years of sharp rate rises.

At the same time, expectations of only modest house price growth mark a departure from the sharp swings experienced since the pandemic. Rather than signalling a return to rapid inflation, Propertymark believes the outlook points to a more balanced and sustainable market.

LOWER RATES NOT ENOUGH

Despite these more favourable conditions, the trade body stresses that lower mortgage rates alone are insufficient to overcome long-standing barriers. High property values, strong rental demand limiting savings, deposit requirements and insufficient housebuilding continue to constrain first-time buyer activity.

Analysis of transaction trends across the UK highlights the lasting influence of pandemic-era tax interventions, alongside more recent economic pressures. These factors have played a central role in shaping buying behaviour and overall market volumes.

In 2021, property transactions totalled 1,073,308 across the UK. By 2025, this figure had fallen to 920,052, representing a decline of 14.3% over four years and underlining the persistence of underlying market constraints.

During 2020 and 2021, the nil-rate band for Stamp Duty Land Tax in England and Northern Ireland was temporarily increased, lowering upfront costs and supporting higher levels of activity. Once these measures were withdrawn, the cost of buying rose again, contributing to a subsequent slowdown.

Comparable interventions were introduced elsewhere. Scotland temporarily increased the nil-rate threshold for Land and Buildings Transaction Tax, while Wales raised the Land Transaction Tax nil-rate band from £180,000 to £250,000 for many residential purchases between July 2020 and June 2021.

Propertymark says these changes reduced tax liabilities for a broader range of buyers and helped sustain transaction volumes at the time. Their removal, combined with ongoing affordability pressures, has since dampened market momentum.

The organisation argues that the experience demonstrates how adjustments to property tax thresholds can stimulate activity by reducing upfront costs. When buyers face lower initial outlays, confidence improves, transactions progress more smoothly and overall market stability is strengthened.

Higher transaction levels also deliver wider economic benefits, as home movers typically spend on furnishings, appliances, renovations and professional services including conveyancing, surveying and financial advice. Propertymark is calling on governments across the UK to recognise property tax reform as a tool for supporting broader economic growth, not solely a housing policy measure.

RENTAL MARKET IMBALANCE

Within the rental sector, the body points to a continued imbalance between supply and demand as a key factor driving rent increases. Higher mortgage rates in recent years, alongside rising taxes and operating costs for landlords, have limited rental stock and intensified pressure on tenants.

Nathan Emerson, chief executive of Propertymark, said: “Lower mortgage rates are a welcome development and will help many first-time buyers revisit their options. Together with modest house price growth, this suggests the market is moving towards a more sustainable position.

“However, affordability challenges remain deeply rooted, and property tax thresholds have not kept pace with house price growth or wages over the past decade, placing a growing burden on buyers.

“Reform is needed to create fairer and more responsive property taxation systems across the UK that reduce upfront costs, support first-time buyers and improve market mobility.

“Alongside this, increasing housing supply and offering targeted support to those struggling to save for a deposit will be essential if homeownership is to become achievable for more people.”