According to an analysis by Moneyfacts, a modest increase in house prices could offset declining mortgage costs for home buyers this year.
The financial data experts said an easing of mortgage rates could allow modest house price growth in 2026 without improving or exacerbating current affordability pressures for first-time buyers and home movers.
Markets are currently predicting that the Bank of England will cut interest rates Basic rate from 3.75% to 3.25% this year.
Assuming Britain sees annual house price growth of 2.5% in 2026, as the Office for Budget Responsibility predicts, a first-time buyer with an 80% LTV borrowing £236,000 would be paying £1,352 per month in January 2026, according to Moneyfacts.
By the end of 2026, that same home buyer could borrow £241,900 while paying £1,345 a month in mortgage costs.
Similarly, someone taking out a new mortgage at a 60% LTV in early January 2026 could borrow an average of £215,000, according to Moneyfacts, and pay £1,168 in mortgage costs.
By the end of 2026, the same buyer, borrowing the same amount, would pay £1,135 a month in mortgage payments, according to Moneyfacts.
Adam French, head of Moneyfacts, said: “After more than three years of higher borrowing costs, even small cuts in mortgage rates could have a meaningful impact on purchasing behaviour. With markets expecting at least one further 25 basis point cut in the base rate, the mortgage landscape could be more forgiving in 2026 than at any time since 2021.
“Our models suggest that an easing of interest rates could allow modest home price growth without further stretching affordability, an important shift after the intense affordability crunch of 2022-2025.”
NAEA Propertymark Chairman Mary-Lou Press said: “While lower interest rates can help first-time buyers offset rising prices, high deposits and tight incomes remain major obstacles for many. Movers and refinancing borrowers, who typically hold more equity, are better positioned to benefit.”