The Office for Budget Responsibility expects house prices to rise by 2.1% in 2026 and 2.5% in 2027, while higher mortgage rates and new landlord tax measures could put further pressure on the housing market.
House price growth in the UK is expected to slow, with property transactions also forecast to remain below earlier projections, according to the latest assessment by the Office for Budget Responsibility (OBR).
The independent fiscal watchdog published its updated economic and fiscal outlook on 28 October 2026, alongside the Government’s Autumn Budget.
The OBR has reduced its forecast for average house price growth to 2.1% in 2026, 0.3 percentage points below its March projection. For 2027, it expects prices to rise by 2.5%, a reduction of 0.5 percentage points compared with its previous forecast.
The outlook reflects continued pressure from mortgage rates, household incomes and changes affecting housing supply.
“The outlook for house prices remains highly sensitive to the path of mortgage rates, the evolution in real incomes, and the impact of planning and regulatory changes on housing supply,” the OBR said.
The forecasts suggest that house prices will continue to rise, but at a slower pace than previously expected.
Higher mortgage rates weigh on property transactions
The OBR also expects fewer property transactions across the forecast period than it anticipated in March.
The number of transactions is projected to increase from around 1.2 million in 2026 to approximately 1.3 million in 2031. However, the overall forecast is around 4% lower than the watchdog’s previous projection.
The OBR attributes the weaker outlook partly to higher mortgage rates, which are expected to weigh on housing market activity.
Mortgage costs influence both the amount buyers can borrow and whether households can afford to move. Higher repayments can also discourage existing homeowners from selling and purchasing another property, particularly when moving means taking out a mortgage at a higher interest rate.
Lower transaction volumes can affect estate agents, conveyancers, mortgage brokers and other businesses that depend on property sales.
The impact also extends to public finances because property transactions generate tax revenue.
Stamp Duty receipts expected to fall
The OBR forecasts that property transaction taxes, including Stamp Duty Land Tax in England and Northern Ireland, will raise approximately £17 billion in the 2026–27 financial year.
That represents a 0.6% decline compared with 2025–26.
The latest forecast is also substantially below the OBR’s March projections. The watchdog expects property transaction tax receipts to be around £3.2 billion lower in 2026–27 and an average of £3.9 billion lower each year over the remainder of the forecast period.
It attributed the revisions to lower-than-expected receipts from residential and commercial property transactions, alongside reductions in its house-price and transaction forecasts.
The figures illustrate how changes in the housing market can affect government revenue. When fewer properties are sold, or property prices grow more slowly than expected, the amount collected through transaction taxes can also fall.
New landlord tax increases raise concerns over rents
The OBR has also warned that higher income tax on rental income could affect the supply of privately rented homes and contribute to higher rents over the longer term.
The Autumn Budget announced a further two-percentage-point increase in income tax rates on property income from April 2027, on top of a two-percentage-point increase announced in the previous Budget.
The combined changes will increase the tax rates applying to property income by four percentage points from April 2027.
The OBR expects the measures to reduce the commercial returns available to private landlords. It warns that some prospective landlords may decide against entering the market, while some existing landlords may leave.
If rental supply falls while demand remains strong, the watchdog believes rents are more likely than not to rise over the longer term.
It also warned that landlords who remain in the market could gain greater pricing power if fewer properties are available, allowing some of the additional costs to be passed on to tenants.
The OBR’s assessment is a forecast of potential market effects rather than a guarantee that rents will rise by a particular amount. The eventual impact will depend on landlord decisions, rental demand and the supply of available homes.
For tenants, the concern is that reduced investment in private rented housing could make it harder to find accommodation in areas where demand already exceeds supply.
Your First Home scheme could have a limited effect on prices
The OBR also assessed the Government’s Your First Home scheme, which is designed to help eligible first-time buyers purchase new-build homes through equity loans.
The watchdog expects the scheme to have a marginal upward effect on house prices by stimulating demand, although it considers the overall impact likely to be limited.
The measure is intended to help eligible buyers overcome some of the financial barriers to purchasing a home. However, additional demand does not automatically translate into a comparable increase in the number of homes available.
Where supply is slow to respond, policies that help buyers afford a property can place some upward pressure on prices. The OBR’s assessment suggests that the scheme’s effect on the wider market will be modest.
The forecast highlights the challenge facing housing policy: helping households access homeownership while ensuring that demand-side measures do not add unnecessarily to pressure on prices.
What the forecast means for the UK housing market
The OBR’s latest projections point to a housing market facing several competing pressures.
House prices are still expected to increase, but more slowly than previously forecast. Property transactions are expected to remain below earlier projections, with mortgage costs continuing to affect buyers’ decisions.
At the same time, the watchdog has raised concerns that higher taxes on rental income could reduce landlord participation and contribute to rent increases if the supply of privately rented homes weakens.
These developments have different implications for buyers, homeowners, landlords and tenants. Buyers may benefit from slower price growth, but higher mortgage costs can offset some of that advantage. Landlords face changes to their tax position, while renters could be affected if fewer homes are available.
The forecasts remain subject to uncertainty. Mortgage rates, real household incomes, housing supply and the response of landlords and buyers will all influence how the market develops.
For now, the OBR’s assessment suggests that the UK housing market is likely to experience slower price growth and weaker transaction activity than previously expected, while the longer-term effect of the latest rental tax changes remains an important issue for the private rented sector.
Source: Office for Budget Responsibility — Economic and Fiscal Outlook, October 2026.
