The UK housing market recovery expected at the start of 2026 has stalled as rising inflation, elevated borrowing costs and growing political uncertainty continue to weigh on buyer confidence, according to property expert Jonathan Rolande.

Rolande (main picture) said hopes of a sustained market rebound driven by falling inflation and lower mortgage rates have been overturned during the first half of the year, leaving the market increasingly subdued despite pockets of resilience.

The warning comes as the mortgage market continues grappling with volatile swap rates, weaker affordability and uncertainty surrounding future Bank of England policy.

At the start of 2026, many economists and housing industry figures had expected easing inflation and falling interest rates to support stronger transaction activity and house price growth.

UNCERTAIN TIMES

Instead, inflation has begun rising again, government borrowing costs have climbed sharply and political instability has returned to Westminster, creating what Rolande described as one of the most uncertain periods for the property market in years.

He said: “There were effectively two versions of 2026. The first was the one everyone expected at the start of the year.

“Inflation would fall, interest rates would come down and political stability would finally allow the property market to regain momentum.

“Instead, five months later, that outlook has been completely overturned. Inflation is climbing again, borrowing costs remain painfully high and political chaos has returned at exactly the wrong moment for the housing market.”

WEAKENED CONFIDENCE

Rolande said the market is increasingly entering a “wait and see” phase, with activity still holding up but confidence weakening rapidly.

He believes house prices may still rise modestly during 2026, although real-term values are effectively falling once inflation is taken into account.

The latest Rightmove data showed asking prices rose by 1.2% in May, although the strongest growth continues to come from the Midlands and northern England while London and the South East remain weaker.

Rolande said: “The real story is regional divergence. The Midlands and North of England are now doing most of the heavy lifting, while London and much of the South East are stagnating or falling.”

STAGFLATION RISK

He also warned the Bank of England now faces increasing stagflation risks as policymakers attempt to balance weak economic growth against persistent inflation pressures.

While some economists argue further rate rises may still be required, Rolande said additional increases could severely damage affordability and buyer confidence.

He added: “The fear now is stagflation. Weak economic growth combined with sticky inflation creates a dangerous environment for households and the wider property market.”

RENTERS’ RIGHTS ACT

Rolande also expects rental growth to slow during the second half of the year following sharp increases ahead of the Renters’ Rights Act implementation earlier this month.

Despite the mounting pressures, he does not expect a major housing market crash.

Instead, Rolande forecasts a subdued second half of 2026 characterised by cautious buyers, slower transactions and weaker investor activity.

He said: “2026 is increasingly looking like a year where the housing market survives, but struggles to move forward.”