A rare alignment of falling house prices, predicted interest rate cuts and more accommodating mortgage criteria could make 2026 one of the most appealing years to purchase a home since COVID, according to a property finance specialist.
Latest data shows UK property values have declined year-on-year, with December recording a further decrease. After months of high inflation and elevated interest rates, this shift is opening doors for buyers who were previously priced out or forced to delay upgrading their homes.
At the same time, respected economic forecasters are anticipating notable reductions in interest rates next year. Capital Economics believes the Bank of England base rate will drop from 3.75% to 3% during 2026. This outlook is echoed by global financial institutions Morgan Stanley and HSBC, both of which predict the base rate will sit at 3% by the end of the year.
John Everest, Director at independent mortgage advisors
Everest Mortgage Services said: “Falling house prices combined with lower interest rates is a powerful mix to create a buyer’s market. If forecasts are correct, many people could be borrowing at cheaper rates while purchasing homes at more realistic prices than we’ve seen in recent years.”
In addition to rate expectations, mortgage affordability has improved significantly. Following calls from the government to support first-time buyers and homeowners, lenders have increased income multiples over the second half of 2025. Between August and December 2025, typical lending rose from around 4.5–5 times income to much higher levels.
Today, many lenders are offering 5–5.5 times income to standard buyers and up to 6.5 times income for first-time buyers quite widely, with one lender now offering up to 7 times income for first-time buyers.
“The offers lenders are now willing to give has created a huge shift in affordability,” John Everest added. “While we don’t expect interest rates to fall to the levels seen during the pandemic, buyers who may have struggled to borrow enough even a year ago may now find the doors wide open.”
John claims the mortgage market itself has cooled compared to 12–18 months ago, increasing competition among lenders. With fewer buyers and strong pressure to lend, banks are engaging in aggressive pricing and product innovation to win business.
This competition has already led to the return of 100% loan-to-value mortgages in 2025, alongside products requiring deposits of less than 5%, which John says is a significant development for renters and first-time buyers trying to get onto the property ladder who don’t have high lump sums saved for typical 5-10% deposits.
These changes are not limited to salaried workers. Self-employed individuals and company directors are also benefiting from improved lending criteria, with more flexible income assessments and higher borrowing multiples now available.
John concludes that while it is impossible to time the market perfectly, 2026 is shaping up to be a rare year where pricing, borrowing costs and lender flexibility all align.
“For anyone considering buying their first home, upsizing, or refinancing, 2026 could represent one of the best opportunities we’ve seen in years. However, getting advice from the right people early will be key to making the most of it.”
