It feels a little like a ‘waiting game’ for the UK housing market at the moment, where inflation was expected to rise and cause bank base rates and mortgage rates to increase, but so far inflation has remained below 3% and mortgage rates are currently falling.

However, as utility bills will start to rise by 13.5% due to the energy price cap rise from 1 July 2026, this is likely to impact on Augusts inflation rate and raise inflation by 0.7%, which will take us back to higher inflation rates.

According to the Economics Observatory, if the “truce” between Iran and the US holds, inflation could reduce back down at the start of 2027, but it could take a while as the chart below shows.

According to Professor Huw Dixon from the National Institute of Economic and Social Research: “The good and bad scenarios share a common path until the end of 2026: inflation peaks at around 4% in November. Thereafter, the paths diverge: in the good scenario, inflation falls and reaches 2.7% by May 2027. Under the bad scenario, it falls less slowly and is still at 3.3% next May.” 

Bank base rate predictions

Now we have an idea of what might happen to inflation moving forward, there are starting to be revised forecasts of what will happen to Bank of England base rates.

If we are lucky, maybe rates don’t move at all until inflation falls, but on the other hand, it is possible that they could rise to just over 4% according to analysis from Fidelity.

In the meantime, as the summary of the latest property market indices shows, property prices and rents have remained relatively resilient across much of the UK housing market, although flats and the prime market continue to face greater challenges.

Transaction levels have also held up well, supported by the 14% increase in the number of homes available for sale, giving buyers more choice and helping to keep the market moving. As always, however, every local market is different, so prices, demand and the likelihood of achieving a sale will vary from area to area and property to property.

Summary of the latest property market indices headlines

Rightmove 

House prices drop in June as sellers seek to attract summer buyers 

 – House prices have fallen by 0.6% (-£2,113) this month to £376,191. This is the biggest June price drop in fourteen years.
 – Summer is typically slower than the spring and has been kick-started early by the heatwave this year, with buyers distracted by sporting events, holidays and better weather.
 – The average two-year fixed mortgage rate has dropped to 5.07% from 5.18% last month, reducing the average monthly mortgage payment by around £30.

Colleen Babcock, property expert at Rightmove comments: “It’s unusual to see a price fall of this size in June, as we would normally expect to see modest price growth at this point in the year. What’s different this time is a combination of factors, including wider economic uncertainty, the timing of the May bank holiday and unusual heatwave, and the high number of homes on the market, which together appear to be bringing forward the traditionally slower summer market.

“In this kind of market, sellers need to work harder to attract attention. Setting a competitive asking price from the outset is key, as buyers are taking more time to compare options and are quick to move on if a home doesn’t stand out on value. When sellers are over-optimistic on price and find they need to reduce later to sell, it can be harder to regain momentum, which underlines just how important it is to get the pricing right from day one.”

Nationwide

Annual house price growth slows in May (May)

 – UK annual house price growth slowed to 1.7% in May, from 3.0% in April.
 – House prices were down 0.6% month on month. 

Halifax

House prices steady in May despite broader market uncertainty

 – House prices edged down -0.1% in May, following a similar -0.1% fall in April.
 – Average property price now £298,806, compared with £299,251 in April.
 – Annual growth up slightly to +0.5%, from +0.4% in April.
 – Northern Ireland continues to record the UK’s strongest annual growth at +7.8%.

Zoopla

More homes are selling than this time last year, even though fewer people are actively looking

 – Sales agreed 1% ahead of last year despite buyer demand being down 10%, as committed home movers support sales.
 – There are 6% fewer first-time buyer enquiries – those active are targeting homes worth £10,000 more than last year (+4.3%).
 – UK house price inflation edges higher to 1.5%.
 – House prices are flat to negative in London and southern regions and increasing by more than 3%+ across northern regions.
 – Housing market activity is holding up in the face of uncertainty, but with fewer buyers the outlook remains finely balanced.