House price growth across Great Britain is expected to remain subdued over the next three years, with higher mortgage costs continuing to restrict buyer demand and property sales, according to new forecasts from Connells Group.
The group predicts average house prices will rise by just 1% in 2026, followed by 1.5% in 2027. Growth could strengthen to 2.5% in 2028 before easing to 2% in 2029.
Mortgage costs squeeze buyers
The average mortgage rate paid by homebuyers has risen from 4.14% at the start of 2026 to 5.22% in October. Monthly repayments on a typical property with a 75% mortgage over 25 years have reached £1,224, compared with £1,115 a year earlier and £874 in 2019.
Connells estimates that higher-than-expected mortgage rates have already knocked around 100,000 transactions off its original forecast for 2026. However, the impact has largely fallen on sales volumes rather than house prices.
The group believes higher borrowing costs have persuaded many households to postpone moving rather than accept lower selling prices. It expects mortgage rates to ease gradually during 2027, allowing some buyers to return, but warns borrowing costs will remain above the levels seen throughout much of the 2010s.
London prices forecast to return to growth
London is expected to recover next year following another difficult period for the capital's housing market. Connells forecasts a 1% fall in London house prices during 2026, followed by growth of 2% in 2027.
Outer London could outperform, with prices rising by 3% next year after a forecast 0.5% decline in 2026. Inner London faces a weaker recovery, with prices expected to rise by just 0.5% in 2027, following a projected 4.5% fall this year.
Connells attributes the difference to stronger domestic owner-occupier demand in Outer London. Higher property taxes and weaker international investor demand are expected to constrain the recovery in central London.
The group's research also highlights London's longer-term price stagnation. Over the past five years, consumer prices have risen by 21.8%. House prices across Great Britain increased by 10.9%, while London recorded growth of just 0.9%.
North East and Scotland expected to lead
More affordable regions are forecast to deliver stronger price growth over the coming years. Connells expects house prices in both the North East and Scotland to rise by 4% in 2028. The North East is forecast to record growth of 3% this year and 2.5% in 2027, while Scotland is expected to achieve 2.5% growth in both years.
By contrast, prices in the South East are forecast to remain unchanged in 2026 and rise by just 1% next year. Connells believes the stronger performance of northern markets reflects their relative affordability, as property prices have increased less sharply in these regions since the financial crisis.
Property sales could recover in 2027
Connells expects housing transactions to begin recovering next year as mortgage affordability improves. The group forecasts around 1.1 million completed sales across Great Britain in 2027, rising to almost 1.2 million in 2028 before falling back to approximately 1.1 million in 2029.
The forecast assumes borrowing costs ease and economic conditions remain relatively stable. Connells also expects some households to return to the market once the final wave of low-rate five-year mortgage deals expires.
Aneisha Beveridge, research director at Connells Group, said: "The pick-up in home moves many expected this year hasn't materialised. Instead, transactions have fallen as higher mortgage rates squeezed buyers' budgets and dented confidence, leaving activity around 100,000 below our expectations at the start of 2026."
She warned that the outlook remains sensitive to mortgage pricing, adding: "But if rates remain around 5%, the risk of small house price falls in 2027, rather than growth, increases significantly."
Despite predicting a recovery, Connells does not expect transaction volumes to return to the highs recorded in 2021. Higher mortgage costs, stamp duty and other moving expenses are likely to keep activity below previous peaks, with uncertainty ahead of the next general election expected to affect confidence in 2029. The forecasts suggest the housing market will recover slowly, with agents continuing to face price-sensitive buyers and subdued transaction volumes.
