The combination of higher mortgage rates and a weaker economy due to the Iran war means we now expect the improvement in housing demand to be softer and slower than we did before the conflict and house prices to grow by just 1.5% in the year to Q4 2026. But we think a bigger fall in interest rates, and therefore mortgage rates, than most expect in 2027 will allow prices to rise by an above-consensus 3.5% in the year to Q4 2027. In the rental market, we suspect that a recovery in demand and a further tightening in supply will push up market rents growth from 2.5% this year to around 3.5% in both 2027 and 2028. (Clients can explore and download all our UK housing forecasts in our UK Housing data dashboard.)