Lower base rates and stability in mortgage rates over 2025 have encouraged more sellers and buyers back into the housing market, building on the momentum generated over 2024. The net result has been 
rebuilding of the sales pipeline - agreed sales, yet to complete - which at 350,000 homes worth over  £100bn in sales value is the largest since 2021. This has supported an increase in gross lending for home purchases.

While there has been a recovery in volumes, house price inflation has held steady at 2-3% over the year  based on mortgage lender indices, a little lower at 1-2% on our own index that includes cash sales. The housing market just needs enough house price growth to give people the confidence to put their homes on the market and for buyers to make sensible bids.

There is a big regional divide opening up with price inflation in southern England close to 0% over 2025  where more supply is boosting choice while affordability pressures and higher buying costs are limiting how much prices can increase. Elsewhere, house prices are more affordable to a wider part of the oopulation, there is a more limited choice of homes for sale and buying costs are lower which is why house prices are 3-4% higher over 2025. It’s likely to be the same direction of travel as we run through 2026.


Regulatory reforms boost first time buyers

First time buyers (FTBs) are the engine for the housing market - we estimate they accounted for almost 40% of all home sales in H1 2025, above the 5 year average share of sales. Existing homeowners are the next largest buyer group (33%), followed by cash buyers (21%) and then investors using a buy to let loan (7%). The reduction in mortgage stress rates since the Spring has certainly been a key factor supporting more FTB purchases. We analysed how many 2 or 3 bed homes a FTB could buy where the mortgage repayments at the stress rate are below the cost of renting in the local market at 80% LTV.  With an 8.5% stress rate it was just 30% but at a lower 6.5% stress rates this increases to 50% of homes  that could be bought.

As well as more sales, this has boosted FTB house prices in northern England - we can see on Zoopla that FTBs are looking to buy homes that are 5-10% more expensive than a year ago in the midlands and northern regions of England. In fact, FTB prices are rising faster than the mainstream market apart from London where they are looking to buy homes 2.5% lower than last year as a result of higher stamp duty costs since April.

Helping renters become buyers

The big constraint for FTBs is deposit levels but this also links to the impact of stress rates. In markets with high home values across southern England you need to put down larger deposits just to get the household income to pass the stress rate to a level that prices in enough people.

Access to mortgages is helping those on middle incomes and above but access to housing is still limited  for a large chunk of would-be buyers who are paying rents every month but could pass a  mortgage affordability test with a small deposit. It’s great to see more innovation in this space, but it  seems like we need more regulatory focus on this area. Yes, greater mortgage regulation stopped the  boom and bust in house prices but at what cost to consumers looking to buy.

What tax reforms to boost market activity and access to home ownership?

The Budget brought a lot of speculation about property tax reforms. We had universal agreement of the  need to remove or reduce the impact of stamp duty on home buying decisions as part of wider reforms of council tax. Sadly none of this happened and there was a new tax on the top 0.5% of the market that won’t do much for access to home ownership.

Most FTBs buying outside of southern England don’t pay stamp duty at all. In London, 80% pay - at an  average cost of £16,000 - with 50% paying across southern regions (£2,500). Stamp duty is a growing  bind on existing homeowners who get less relief and where the costs are starting to mount up - more average buyers in southern England are starting to pay 2-3% of the property value in stamp duty - with  low price inflation this is not encouraging moves. This means fewer homeowner movers and more likelihood of people staying put, remortgaging to raise more debt to fund improvements. The case for reforms remains and the proposals from the Onward think tank1 are well worth consideration.



Do the proposed reforms to the home buying process go far enough?

Home buying and selling reforms are being consulted on by the Government at present. Everyone agrees on the need to seek improvements to increase certainty and reduce costly fall throughs and the consultation is welcome with many voices being heard.

The single biggest challenge is that all the data needed to make a recommendation to buy or lend on a property is not digitally available or shareable at present, and the ecosystem doesn’t exist to pass this information up and down the process.

Home buying and selling reform is complex and has some way to go if it remains voluntary and with little to no mandating of requirements. Increasing the focus on consumer education is an important part  of this process as, at the end of the day, it is consumers who decide to pull out of sales.

It’s positive mortgage lenders are getting more involved as the conveyancing industry works to their instructions after all, and some early initiatives are yielding improvements in some key areas. Although there is much more to be done, this is something to be optimistic about as we head into 2026.

Find out more: Keep up to date with Richard’s research and insight https://www.zoopla.co.uk/discover/meet-the-team/richarddonnell/

This article was first published in the winter edition of Society Matters magazine