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UK property price growth slowed to its weakest annual rate in more than two years in October 2026, as rising mortgage costs, geopolitical uncertainty and weaker buyer confidence weighed on the residential property market, according to mortgage lender Nationwide.
Property prices increased by just 0.5% compared with October 2025, down from annual growth of 0.8% in September and the slowest pace since January 2024.
- UK house prices increased just 0.5% annually in October, the weakest growth since January 2024, with the average property valued at £273,566.
- Mortgage borrowing costs continued to rise, with average two-year and five-year fixed rates approaching 6% as markets anticipated a Bank of England rate increase.
- Economists expect further pressure on property prices despite the government’s £4.7 bn Your First Home scheme, which will support eligible first-time buyers from spring 2027.
The average UK property price stood at £273,566 in October, unchanged from the previous month and below the recent peak of £278,880 recorded in April.
The figures were slightly stronger than economists had expected. Analysts surveyed by Reuters had forecast a 0.1% monthly decline in prices and a slowdown in annual growth to 0.6%.
Nationwide’s latest data adds to evidence of weakening demand across the UK housing market, with higher borrowing costs limiting affordability and discouraging prospective buyers.
Robert Gardner, Nationwide’s chief economist, attributed part of the slowdown to an uncertain economic outlook, including geopolitical tensions and the impact of the Middle East conflict on energy prices and inflation expectations.
This in turn has led to mounting financial market expectations of bank rate increases, which have maintained upward pressure on the market interest rates which underpin mortgage pricing.
Robert Gardner, Nationwide’s chief economist
The deterioration in buyer sentiment has also become more apparent in property market surveys.
“Surveyors report that new buyer inquiries remain weak,” Gardner said. “Consumer sentiment dipped noticeably in October, with households becoming less confident about the outlook for the general economy as well as their own financial situation in the year ahead.”
UK mortgage rates approach 6% as Bank of England rate hike looms
Mortgage costs have continued to rise despite the Bank of England keeping its benchmark interest rate unchanged at 3.75% since December 2025.
Volatility in bond markets has pushed up swap rates, which lenders use to price fixed-rate mortgage products, increasing borrowing costs for prospective homebuyers and existing borrowers approaching refinancing.
The average five-year fixed mortgage rate crossed 6% earlier in October for the first time in three years.
According to financial information provider Moneyfacts, the average five-year fixed rate stood at 5.99% on Thursday, October 29, while the equivalent two-year rate reached 5.97%.
Separate Bank of England data showed that the average five-year fixed mortgage rate at 75% loan-to-value had increased to 4.98% at the end of September, its highest level since 2023.
Financial markets were fully pricing in a 25-basis-point increase in the Bank of England’s benchmark rate to 4% at the following week’s monetary policy meeting. Such a move would represent the first increase in the central bank’s policy rate in three years.
The shift in expectations follows concerns that higher energy prices associated with the Middle East conflict could sustain inflationary pressure and require tighter monetary policy.
Higher fixed mortgage rates are adding to affordability constraints in the housing market, particularly for households seeking new mortgages or refinancing existing loans.
Bank of England figures published on Thursday showed that mortgage approvals declined more sharply than economists had anticipated in September, reaching their lowest level since 2023.
Ashley Webb, economist at Capital Economics, expects the increase in financing costs to translate into further property price declines.
UK property market faces weaker demand despite £4.7 bn housing scheme
The government has introduced a new initiative designed to improve access to homeownership, although property analysts question whether it will be sufficient to offset the impact of higher mortgage rates.
Chancellor John Healey confirmed the £4.7 bn Your First Home scheme in his first Budget on Wednesday, October 28.
The programme, scheduled to begin in spring 2027, will allow eligible first-time buyers in England to purchase newly built homes with deposits of just 2.5%.
Under the initiative, buyers will also receive support through a government-backed equity loan covering 20% of the property’s value.
The scheme is intended to help households that cannot rely on financial assistance from family members, often referred to as the “bank of mum and dad”, when raising a deposit.
Property specialists expect the programme to provide some support to demand, but its delayed introduction and the broader mortgage environment could limit its immediate effect on transactions.
Mark Harris, chief executive of mortgage broker SPF Private Clients, described the initiative as “welcome” but questioned whether it would generate sufficient activity.
The scheme would not become available until spring 2027 and said “it seems unlikely that on its own it will be enough to boost the transactions and activity the market needs”.
Rob Wood, chief UK economist at Pantheon Macroeconomics, also expects the programme to provide a “modest boost” to the housing market, although he anticipates subdued property prices during 2027.
Tom Bill, head of UK residential research at Knight Frank, argued that borrowing costs would remain the more significant influence on market conditions.
“The impact of rising mortgage costs eclipses any support measure announced in this week’s Budget,” Bill said. He suggested the absence of major unexpected measures in the Budget could support a limited improvement in confidence over the coming months.
“The absence of major shocks from the chancellor may produce a modest relief bounce in coming months. However, asking prices will need to reflect the much tougher financial landscape that buyers face.”
Higher landlord taxes could put further pressure on UK rents
The Budget also included additional tax measures affecting residential landlords, raising concerns about their potential consequences for the private rental market.
From April 2027, income tax rates on rental income will increase by two percentage points, in addition to a similar rise announced in the 2025 autumn Budget.
Property industry representatives warned that the additional tax burden could encourage some landlords to increase rents or sell properties, potentially reducing the supply of homes available to tenants.
The measures come as the wider residential market faces persistent affordability constraints, with rising mortgage rates limiting purchasing power and weakening demand.
Nationwide’s October figures indicate that UK house prices have largely stalled following their earlier peak, with average values remaining below April levels and annual growth slowing to just 0.5%.
Analysts at Capital Economics, Pantheon Macroeconomics and Knight Frank expect the market to remain under pressure, with the direction of mortgage rates and borrowing costs likely to be more influential in the near term than the government’s new support for first-time buyers.
