UK housing transactions are expected to fall below initial forecasts for 2026, according to analysis from Zoopla, as mortgage rate volatility and economic uncertainty continue to impact buyer activity.
Richard Donnell, Executive Director at Zoopla, stated that sales agreed over the year look set to be lower than anticipated at the start of 2026. He noted that the final six months of 2025 were “very weak” due to Budget uncertainty affecting transaction levels.
Mortgage rate impact
The decline in market activity has been driven by fluctuating mortgage costs, with average rates rising from 4% at the start of the year to 5% in April. This increase has prompted buyers to delay purchase decisions.
“Average mortgage rates hitting 5% in April, having started the year at 4% has led to a decline in mortgage approvals for home purchase as buyers adopt a wait and see approach to mortgage rates which are now declining once again,” Donnell said.
Bank of England data released for May 2026 showed net mortgage approvals for house purchases decreased to 56,200, below the six-month average of 63,300. Remortgage approvals also fell to 33,000 in May from 51,200 in April.
Market outlook
Jeremy Leaf, a north London estate agent and former RICS residential chairman, described mortgage approvals as “arguably the most important of all the housing market data” due to their forward-looking nature.
“On the ground, we are finding it is not just the numbers which are down, but the time genuine buyers are taking before playing their mortgage offer card,” Leaf said.
He added that concerns about mortgage rate direction and cost of living pressures, compounded by ongoing conflict in Iran, are delaying decision-making. Political uncertainty is adding further caution to the market.
The trajectory for housing sales in the second half of 2026 will depend largely on how far mortgage rates decline from current levels. While rates have begun to fall again, the pace of reduction remains uncertain as buyer preferences continue to shift amid economic pressures.
The subdued transaction environment contrasts with earlier expectations for market recovery, with affordability constraints continuing to weigh on activity levels. Industry observers expect cautious market conditions to persist in the near term, with any improvement contingent on sustained reductions in borrowing costs.
