Savills sees UK house prices falling 1.5% as mortgage rates stay above 5%

Savills said on Wednesday that it expects UK house prices to fall by 1.5% in 2027, with no recovery until 2028, as higher mortgage rates continue to weigh on buyers.

The agent puts growth for 2026 at 0.0% but expects prices to keep falling over the rest of 2026 and through 2027, a peak-to-trough decline of around 3.0%.

Official HM Land Registry figures put the average UK house price at £273,037 in August 2026, up 0.9% on a year earlier and 0.3% on the month.

On the Savills forecast, the average UK price would drop by £5,500 in 2027, before rising by £12,500 in 2028.

Emily Williams, director of residential research at Savills, said the “drawn-out conflict in the Middle East” had pushed back the prospect of meaningful mortgage-rate relief.

Savills now expects average mortgage rates to stay at or above 5% until early 2028, a deterioration from its June 2026 forecast.

The Bank of England held Bank Rate at 3.75% on 17 September and said higher energy costs could make a rise necessary if volatility persists.

Governor Andrew Bailey said the longer the volatility lasted, “the more likely it is we will need to raise Bank Rate” to bring inflation back to its 2% target.

Savills assumes a year-end base rate of 4.00% in 2026 and 4.25% in 2027, above the 3.75% set in September, before a fall to 3.25% in 2028.

London, the South East and the East of England are each forecast to see prices fall by 3.5% in 2027, the sharpest drops in the forecast.

The South West is forecast to fall 3.0%, the East Midlands 2.0% and the West Midlands 1.5%, in line with the UK figure.

Further north, the North West, North East and Scotland are each forecast to rise by 1.0% in 2027, with Wales and Yorkshire and The Humber up 0.5%.

Over the five years to 2031, Savills forecasts growth of 23.3% in the North West but only 8.1% in London.

Savills said average prices in London are 11.3 times average earnings, while in the three northern regions they remain below six times.

Williams said the pressure on mortgage costs was “unlikely to trigger a sharper correction”, because most homeowners have absorbed higher borrowing costs since late 2022.

Savills expects prices to start recovering from 2028, with growth of 3.5% that year and a rise of 15.8%, or £56,500, over the five years to 2031.

Savills said a general election called in 2027 could delay a recovery if it put renewed upward pressure on inflation, borrowing costs or buyer confidence.