"Interest rates have fallen as expected, giving buyers a bit more financial capacity than they had a year ago. But a lot has changed over the last six months. Greater geopolitical uncertainty, including tariffs and trade wars, has made predicting the precise path of further cuts more challenging"
- Lucian Cook - Savills
UK mainstream house prices are forecast to grow by 24.5% over the next five years, according to updated projections from Savills. The firm expects a modest 1.0% rise in 2025, followed by stronger growth in subsequent years, driven by greater affordability and easing mortgage regulation.
The updated outlook reflects a subdued start to the year. House price growth for 2025 was revised down from an earlier forecast of 4.0% to 1.0%, after a weaker-than-anticipated first half marked by geopolitical uncertainty and uneven buyer activity. However, Savills has upgraded its medium-term projections due to improved lending conditions and the potential for increased transaction volumes.
Over the five years to 2029, the average UK house price is expected to rise by around £86,300.
Revised five-year mainstream forecast 2025-2029
| 2025 | 2026 | 2027 | 2028 | 2029 | Five year total | |
| Average UK house price growth | 1.0% | 4.0% | 6.0% | 6.0% | 5.5% | 24.5% |
| Previous forecast | 4.0% | 5.5% | 5.0% | 4.0% | 3.0% | 23.4% |
| UK residential transactions | 1.04m | 1.15m | 1.18m | 1.19m | 1.18m | - |
| Year-end Bank base rate | 3.75% | 3.00% | 2.50% | 2.50% | 2.50% | - |
| Real GDP growth | 1.2% | 1.0% | 1.6% | 1.9% | 1.7% | 7.6% |
“Interest rates have fallen as expected, giving buyers a bit more financial capacity than they had a year ago,” said Lucian Cook, head of residential research at Savills. “But a lot has changed over the last six months. Greater geopolitical uncertainty, including tariffs and trade wars, has made predicting the precise path of further cuts more challenging.”
According to Nationwide data cited by Savills, annual house price growth slowed to 2.1% in the year to June 2025, down from 4.7% in December 2024. Despite an initial surge in activity early in the year following Stamp Duty changes, the momentum quickly subsided. March recorded the second-highest number of monthly sales since 2006, but buyer demand dropped sharply in April and May. New buyer enquiries in May fell to a net balance of -32, the lowest since September 2023, according to RICS.
Encouragingly, demand returned to positive territory in June at +3. Supply has remained steady, with a net balance of +7 in May. However, sales agreed remained low at -28, leading to a 0.5% dip in house prices in Q2. This reflected a high number of unsold homes relative to buyer activity.
“The last three months have been marked by a lack of buyer activity, despite improving affordability,” Cook added. “In light of this and the potential for more buyer uncertainty in the run up to the Autumn Budget, we have revised our house price forecast for this year.”
Savills projects that transaction numbers will reach 1.04 million by the end of 2025, broadly in line with previous expectations. Although high supply may continue to limit near-term price increases, the firm maintains a positive view for the remainder of the year, anticipating stronger demand in early autumn.
“We anticipate that buyer demand will pick up heading into early autumn, particularly among first-time buyers and mortgaged home movers, driven by an expected base rate cut in August and a more competitive mortgage market,” said Emily Williams, director of research at Savills. “Consumer confidence in June was the joint highest since last summer, and mortgage rates remain at their lowest for a while.”
Savills expects affordability to be the key driver of growth beyond 2025. Easing of mortgage regulations, such as relaxed affordability stress tests and expanded lending ratios above 4.5 times income, is likely to support increased access to homeownership.
“Falling interest rates in combination with relaxation around affordability tests will open up greater capacity for house price growth than would otherwise be the case, ultimately leading to a higher transaction market,” said Dan Hill, research analyst at Savills. “We expect this to offset the weaker economic outlook over the forecast period, albeit the softened prospects for economic growth will temper homebuyers' appetite to stretch themselves much further.”
He added: “However, recent experience tells us that the path of interest rates is often winding and uneven, and we should therefore still treat the outlook with caution. Higher than expected inflation in the UK is making policymakers cautious when it comes to further base rate cuts. While we have forecast based on the scenario described, there are ongoing risks in both directions which have the potential to disrupt the housing market.”
Savills’ overall five-year outlook remains optimistic, but it is shaped by shifting economic conditions and policy decisions that could still influence the market trajectory.
