Savills has warned mainstream UK house prices will fall by a further 1.5 percent in 2027, as the prolonged Middle East conflict keeps mortgage rates higher for longer and saps buyer confidence.
The agency’s latest five-year residential forecast, published on 4 November, says average mortgage rates are now not expected to fall below 5 percent until early 2028. Prices are expected to keep drifting lower through the rest of 2026 and across 2027, producing a peak-to-trough decline of around 3.0 percent.
Landlords face a split-screen market heading into the new year. Softer prices could open buying windows in parts of the country, but higher-for-longer borrowing costs and falling transaction volumes mean anyone refinancing or expanding in 2027 will pay more to do it. The Bank of England is widely expected to lift base rate from 3.75 percent to 4 percent on Thursday after inflation jumped to 3.5 percent in September.
Mortgage rates to stay above 5 percent until 2028
The interest rate outlook has worsened since Savills’ previous forecast in June 2026. Its central case now has base rate ending 2026 at 4.00 percent and 2027 at 4.25 percent, with the assumed average mortgage rate at 5.32 percent this year-end and 5.09 percent at the end of 2027. Relief only arrives from early 2028, when Oxford Economics expects base rate to start falling again.
Transaction volumes are forecast to fall in 2027 as dearer mortgages weigh on buyer appetite. Activity should start to recover from 2028, though the pace will differ between buyer groups. Emily Williams, director of residential research at Savills, said the drawn-out conflict had pushed back meaningful rate relief. “We expect this will suppress activity and put pressure on prices next year,” she said. “But this is unlikely to trigger a sharper correction.”
Williams pointed to two cushions against a deeper slide. Most homeowners have already absorbed higher borrowing costs since late 2022, with relatively few still waiting to refinance off sub-2 percent deals, and the labour market remains resilient. Together, she said, those factors should keep forced sales low and limit further downward pressure.
North to lead as first-time buyers drive recovery
Savills expects growth to return in the second half of 2028, reaching 3.5 percent for that year, then 5.0 percent in both 2029 and 2030 as mortgage rates bottom out and six straight years of income growth outpacing house prices rebuild buying power. Over the five years to 2031, average prices are forecast to rise 15.8 percent, or around 56,500 pounds, comfortably ahead of forecast inflation of 9.8 percent.
First-time buyers are expected to lead the recovery from 2028, helped by deposit affordability at its best level since 2008, looser mortgage stress testing and the government’s Your First Home scheme. Savills predicts they will overtake cash buyers as the largest buyer group by 2029. Cash purchases are expected to decline, while lower returns, heavier regulation and higher taxation keep buy-to-let activity below its long-term average and speed the shift towards larger, professional landlords.
The strongest five-year growth is forecast across the North of England, Wales and Scotland, where relative affordability leaves more room for values to climb. Average prices in the three northern regions sit below six times average earnings, against 11.3 times in London. This follows Landlord Knowledge’s report on the Connells forecast, which predicted a 1.5 percent price rise in 2027 – a notably more upbeat call than Savills’ latest view. The gap between the two forecasts shows how much hinges on the path of mortgage rates from here.
For context, Nationwide reported annual growth of just 0.5 percent in October, the slowest in more than two years, with the average UK home at 273,566 pounds. Full detail is in Savills’ November forecast.
What this means for landlords
- If you are looking to buy in 2027: softer prices plus weaker buyer competition could create openings, especially across northern markets where Savills sees the strongest five-year growth.
- If you are refinancing next year: budget for mortgage rates above 5 percent through 2027, with more than two million households refixing in 2027 facing higher payments.
- Watch for Thursday’s Bank decision: a widely expected rise to 4 percent would feed straight into tracker and variable costs within weeks.
- Regulatory drag is structural: Savills expects buy-to-let activity to stay below its long-term average, so underwrite deals on yield, not hoped-for capital growth.
- Bottom line: 2027 looks like a buyer’s grind rather than a crash – patience and realistic offers count for more than speed.
Editor’s view
Savills is telling landlords to park capital-growth hopes for another year and focus on cashflow. The real signal is the North-South split: where earnings multiples are lower, the recovery math works first. Landlords who buy for yield in those markets can afford to wait out the rate cycle.
Author: Editorial Team – UK landlord & buy-to-let news, policy, and finance
Published: 05 November 2026
Sources: Savills, Bank of England
Related reading: Connells forecasts 1.5% house price rise in 2027
