Executive Summary – Latest House Prices, Mortgage Trends & Rental Insights

The UK property market is entering a new phase of stability after two turbulent years marked by inflation, rising interest rates, and shifting buyer sentiment. Prices are holding firm at the national level, with official data still showing growth of nearly 3% year-on-year, but the story on the ground is more complex.

Asking prices are beginning to flatten, the rental market is cooling after years of intense pressure, and mortgage activity is showing signs of revival as interest rates ease slightly.

Regional divides are widening: while northern regions and Scotland continue to post stronger gains thanks to better affordability, London and the South are experiencing slower growth as stretched household budgets limit demand.

Against this backdrop, the market is finely balanced, with upcoming policy decisions and interest rate movements set to determine whether 2026 sees a return to growth or a period of stagnation.

In simple terms:

The North and Scotland remain more resilient, buoyed by stronger affordability and localised investment.

The South, particularly London, faces headwinds as stretched affordability and higher-value homes are more exposed to interest rate pressures.

The rental market, once the red-hot driver of inflation, is cooling, but tenants still face historically high rent-to-income ratios.

The sales pipeline is stabilising as approvals rise and mortgage rates ease modestly, but buyer confidence remains fragile ahead of the Autumn Budget.

This creates a market where activity is steady but cautious, and where both sellers and buyers must navigate regional nuances and policy uncertainty.

UK Prices & Regional Trends

Official HPI (July): UK average house price £270,000, up 2.8% YoY. England £292k (+2.7%), Wales £209k (+2.0%), Scotland £192k (+3.3%).

North East England leads with +7.9% YoY growth, reflecting affordability and ongoing investment into regional cities.

London saw just +0.7% YoY, with high prices and stretched mortgage servicing costs keeping growth subdued.

Rightmove Asking Prices (Sept): Avg. asking price £370,257; flat YoY (–0.1%), but up 0.4% MoM as sellers test autumn demand.

Properties above £500,000 are proving more challenging to shift, with Rightmove reporting five extra days to find a buyer in London and the South compared to northern regions.

Sales agreed are up 4% YoY, suggesting committed buyers remain, but are price-sensitive.

Analysis:

The dual picture, with official data showing modest growth and live asking data revealing softness, reflects the lag in completions. Sellers are still pricing ambitiously, but buyers are holding firm. This is a balanced standoff that could tip either way depending on interest rate policy and November’s fiscal announcements.

UK Property Market Activity, Finance & Affordability

Transactions: July saw 95,580 residential sales (SA), +1% MoM, indicating stability compared to 2024’s volatility.

Mortgage approvals: At 65,400 in July, approvals hit a six-month high, pointing to improving confidence in the mortgage market.

Mortgage costs: The Bank of England held the Base Rate at 4.0% in September and slowed its quantitative tightening programme, a signal to calm markets and stabilise borrowing costs. Average new mortgage rates dipped to 4.28%, down from 5%+ peaks in 2024.

Affordability remains stretched:

The average buyer on a median income still spends – 34% of take-home pay on mortgage repayments, above the long-term norm of – 28%.

This is driving regional divergence, with northern markets (where mortgages cost less as a % of income) holding up better.

Rental Market

The rental sector continues to be a critical pressure point:

ONS (stock measure, Aug): UK average private rent £1,348, up 5.7% YoY. England’s rents are up 5.8%, Wales +7.8%, Scotland +3.5%. The North East leads growth at +9.2%, reflecting catch-up from historically low levels.

Zoopla Rental Market Report 2025 (new lets, Sept): New-let rents rose just +2.4% YoY (slowest in four years), avg. £1,301. This reflects easing demand and improved supply, as more landlords re-enter the market and new-build completions pick up.

Key trend:
The gap between existing rents and new-let rents is narrowing. This means fewer double-digit rent hikes for tenants renewing contracts, and a gradual cooling in rental inflation. However, affordability remains tough, and rents are still 20 – 25% higher than pre-pandemic averages.

Supply & Housebuilding

Supply is the long-term challenge.

NHBC Q2 2025: Registrations 30,405 (+4% YoY), signalling modest pipeline growth. Houses increased, but flats saw a decline, a concern for urban rental markets.

Completions: ~32,434 in Q2, up quarter-on-quarter but still lagging long-term targets (govt. ambition: 300k per year).

Implication: Even with improved registrations, the UK property market remains structurally undersupplied. Without major policy shifts in land use and planning reform, the balance between housing demand and new delivery will remain tight, supporting prices over the medium term.

Property Market Outlook & Strategic Insights

Looking ahead to Q4 2025 and early 2026:

Prices: The base case is for sideways growth nationally (0–2% annualised), with stronger performance in affordable northern markets and weaker in southern, higher-value areas.

Lucian Cook, head of residential research at Savills, said, ‘A steady improvement in affordability should allow for house price growth to gain momentum over the next couple of years.

Policy risk: The Autumn Budget (26 Nov) may include housing tax changes, particularly affecting higher-value homes and landlords. Any major policy shifts could reset short-term dynamics.

Interest rates: With inflation now closer to 2%, the BoE’s next moves are finely balanced. Rate cuts are on the table in 2026, but policymakers remain cautious not to reignite inflation.

Rentals: Rental inflation will likely fall into the 2–3% YoY range by year-end, easing cost-of-living pressures but still keeping yields relatively healthy for landlords.

“The property market in 2025 is showing clear signs of stabilisation. While national growth is modest, we’re seeing strong resilience in Liverpool and across the North West, where affordability and sustained demand continue to underpin investor confidence. For buyers and landlords alike, this is a market of opportunity — provided decisions are guided by data, strategy, and long-term vision.” — Pat Harper, Total Property Group, Liverpool

Property Market Strategic Takeaways

Sellers: Competitive pricing is crucial; overpricing risks a longer time-to-sell, especially in London and the South.

Buyers: Mortgage costs have stabilised, locking in rates before potential policy shifts may be wise. An investment property is real estate purchased with the primary aim of generating a financial return, rather than being used as a personal residence.

Investors/Landlords: Consider regional diversification; northern cities and Scotland offer more substantial rental growth potential than overheated southern markets.

Developers: Focus on affordable houses over flats, as demand remains robust, and policy incentives may favour this segment.

Overall Conclusion:

The UK property market in late 2025 is stable but stretched, with affordability acting as a ceiling on growth. The market’s direction will hinge on November’s Budget and the Bank of England’s 2026 rate trajectory. Expect regional divergence to widen, with the North and Scotland outperforming the South.