Following a period of adjustment, the property market has entered 2026 on a steady footing. Far from sliding, we've seen average prices rise at the start of the year, with most experts now predicting modest growth rather than further falls.

Whether you're a homeowner or first-time buyer, you may be wondering whether mortgage rates are likely to continue rising. And if so, how is this likely to impact house prices going forward? Let's take a look...

What is happening to house prices right now?

As of January 2026, the average UK property value reached a new milestone, surpassing £300,000 for the first time according to Halifax, with the typical home now costing £300,077.

While national prices rose by 1.0% annually, regional performance varies significantly; Northern Ireland leads with 5.9% annual growth (£217,206), whereas southern regions like London and the South East have seen prices soften by more than 1% due to higher sensitivity to borrowing costs.

Whether we’ve hit a peak remains to be seen of course, but Amanda Bryden, Head of Mortgages at Halifax, expects house prices to rise by 1-3% in 2026:

"The housing market entered 2026 on a steady footing, with average prices rising by +0.7% in January, more than reversing the -0.5% fall seen December. Annual growth also edged higher to +1.0%, pushing the cost of the typical UK home above £300,000 for the first time.

"While that’s undoubtedly a milestone figure, and activity levels show a resilient market, affordability remains a challenge for many would-be buyers.

"Broader economic conditions continue to provide some support. Wage growth has been outpacing property price inflation since late 2022, steadily improving underlying affordability. That’s a positive trend for buyers, and the long-term health of the market.

"And we’re now seeing more mortgage deals below 4%. If inflation continues to ease, there should be further gradual reductions as the year goes on.

"All in all, we still think house prices are likely to edge up between 1% and 3% this year."

On this note, we should say that there are winners and losers when it comes to changing house prices. While landlords with multiple properties may rejoice at the thought of rising prices, first-time buyers, or even existing homeowners looking to ‘trade up’ their home, may wince at rising prices.

If you already own a property and are looking to buy a more expensive home, while your existing home may have risen in value, it’s likely that the more expensive property you're looking to buy will also have risen by a bigger margin (e.g. if prices of your existing and desired, more expensive home both rise by 2%, you'll be out of pocket).

What is happening to mortgage rates?

UK inflation has cooled substantially from its 2023 highs. As of February 2026, the latest confirmed CPI inflation figure (for December 2025) stood at 3.4%. While this was a slight uptick from previous months, the Bank of England still expects inflation to fall back toward its 2% target by April 2026. This easing of price pressures is a primary driver behind the stabilizing mortgage market.

According to UK Finance, around 1.8 million fixed-rate mortgage deals are set to expire between now and the end of 2026. But remortgaging homeowners may find that while rates have fallen from the 2023 peak, they are still stepping up to higher payments than their previous ultra-low fixes. However, the current stability at 3.75% provides a much more predictable environment than last year.

Are mortgage rates likely to continue rising?

The trend of aggressive rate hikes has ended, replaced by a period of gradual reduction. After six cuts since August 2024, the Bank of England held the base rate at 3.75% in February 2026. While the committee is currently divided, further reductions are anticipated later in the year as inflation continues to settle, which could lead to even more competitive mortgage pricing.

What is the relationship between house prices and mortgage rates?

We know that when interest rates rise, mortgage rates also typically edge upwards. But what about the relationship between mortgage rates and house prices?

Usually, when mortgage rates rise, house prices fall, and vice versa.

The reason why mortgage rates typically have an inverse relationship with house prices is because when mortgage rates are low, budding homeowners are able to borrow more cheaply, and can therefore take on more debt.

This is why when rates are low, home buyers might be inclined to borrow as much as they possibly can in order to finance the biggest and best house they can afford to buy.

In other words during times of low interest rates, taking on a big, fixed mortgage - where the vast majority of your monthly payments is spent on capital repayments - is a low-risk move for many buyers.

In contrast, when mortgage rates are high, sensible home buyers have to be a lot more careful about the amount of debt they take on. For example, when average fixed mortgage rates go above 5% or so - as if the case today - buyers must seriously consider the impact of interest payments on their mortgage. That’s because it's likely a large proportion of their monthly payment will go towards servicing mortgage interest.

This is why, when mortgage rates are high, buyers are usually less eager to take on big mortgages.

And even if there are still lots of buyers who are willing to pay high interest, banks are often less willing to lend to those with low deposits in a high interest environment, especially first-time buyers, due to the increased risk of these buyers falling into negative equity.

These are two big reasons why higher mortgage rates can have a huge impact on the amount buyers are able and/or willing to borrow. And this is also why higher mortgage rates usually leads to a fall in house prices.

Why haven’t house prices fallen by a bigger margin?

While mortgage rates remain higher than the record lows of 2021, the market has seen a notable 'post-Budget' recovery in sentiment. The average two-year fixed rate of 4.28% in early 2026 is a significant improvement from the 6.8% highs seen in mid-2023. This improved affordability, combined with wage growth outpacing property inflation since late 2022, has supported house prices and prevented the major crashes many predicted during the peak rate period.

While house prices typically rise when mortgage rates fall, it’s extremely tough to predict the exact trajectory of the property market.

House prices aren’t solely determined by mortgage rates. Sure, credit availability is a big factor that can impact prices, but other factors such as lack of supply, strong demand, stringent planning laws, forbearance of lenders, and the UK’s growing population are other important variables that can impact house prices. And a combined mix of these external variables is likely to be the reason why the market often doesn't act even as the professionals predict.

So, in summary, when it comes to the relationship between mortgage rates and house prices, here are the key points you need to know for 2026:

• Fixed-Rate Trends: Average five-year fixed mortgage rates have fallen significantly from their mid-2023 peaks of 6.32%; as of February 13, 2026, the average two-year fixed rate is 4.85% and the average five-year fix is 4.94%.

• Base Rate Link: Mortgage rates remain closely linked to the Bank of England base rate, though fixed products are primarily priced based on future market expectations (swap rates), often moving ahead of official base rate changes.

• 2026 Monetary Policy: After cutting rates six times since August 2024, the Bank of England held the base rate at 3.75% in February 2026. While further cuts are projected later this year, the committee remains split on the timing.

• Price Resilience: While higher rates historically put downward pressure on prices, the 2026 market is showing resilience. Prices are forecast to rise by 2% to 4% this year as improving affordability and wage growth outpace modest interest rate declines.

• Beyond Interest Rates: Mortgage rates are not the only variable; a persistent shortage of housing supply, regional economic differences (with Northern Ireland and Scotland currently outperforming London), and changes to Stamp Duty continue to be major drivers of property values.

To learn more about the property market, take a look at our article that explores house prices in regions across the UK.