After two bruising years of volatility, the end of 2025 finds the UK housing market in a very different place
The era of near-zero interest rates is firmly behind us, but so – crucially – is the peak of the tightening cycle. Inflation has eased, the Bank of England has already cut several times, and Bank Rate now sits at 4%.
Markets and economists widely expect that to edge down again, with many forecasting a cut to 3.75% in December and potentially 3.5% in early 2026. Mortgage pricing has already moved in anticipation: average fixed rates are at their lowest since before the 2022 mini-budget, even before any further base-rate reductions.
For developers, that adds up to a mood of cautious optimism: not a sudden boom, but the sense that conditions are slowly becoming more supportive again.
Housing: gentle growth from a lower base
Forecasts for private housing are quietly improving. The Construction Products Association’s 2025 forecasts point to growth in private new housing of around 2–4% in 2025 and 4–7% in 2026, depending on the scenario and update.
That expansion is from a lower starting point – 2023–24 saw activity fall back sharply as buyers absorbed higher borrowing costs – but the trend is important. It signals:
- A stabilising market rather than ongoing contraction
- Gradual improvement in buyer confidence as mortgage rates ease
- A stronger medium-term pipeline for both new build and repair, maintenance and improvement (RM&I)
Broader construction output is also expected to return to modest growth, with forecasts suggesting overall construction output rising 1–2% in 2025 and accelerating into 2026 and beyond.
In parallel, mortgage write-off rates are expected to remain exceptionally low by historical standards, underlining that the banking system is not facing a systemic mortgage crisis – another quiet positive for the sector.
What this means from the developer’s side
Taken together, three themes emerge for housebuilders and residential developers:
1. The affordability squeeze is easing, not disappearing
Mortgage rates are likely to remain higher than the ultra-cheap deals seen pre-2022, but lower than their 2023/early-2024 peaks. That means buyers will still be cost-conscious, but more willing – and able – to commit if the product and proposition are right.
2. Lenders are selective, not shut
With modest economic growth and political uncertainty, credit committees are focusing on scheme quality, sponsor track record and the security of the underlying asset. Robust build quality, strong documentation and recognised warranties are becoming as important as headline GDV.
3. Regional and product differences matter more
Forecasts and transaction data continue to show stronger resilience outside the highest-priced London postcodes, and sustained demand for practical family housing over more discretionary segments.
In short: the taps are not being turned fully back on, but well-structured, well-evidenced schemes in the right locations should find both funding and buyers.
Four priorities for housing developers in 2026
Against that backdrop, there are clear, practical steps developers can take now.
1. Make schemes “lender-ready” from day one
Engage early on warranty and technical risk. Choosing a latent defects insurance provider that is aligned with UK Finance guidance and recognised by major lenders reduces friction later in the process. Underwriters and valuers are far more comfortable when they can see that build quality and long-term performance are being independently overseen.
2. Turn quality evidence into a de-risking tool
In a cautious credit environment, your ability to prove quality is a competitive advantage. Build Warranty’s LDI model – combining a nationwide network of chartered surveyors with structured technical audits – generates a detailed, digital audit trail across the build. That evidence can support:
- Development finance approvals
- Valuation sign-offs
- Purchaser and broker confidence at reservation and exchange
3. Use LDI and consumer protection as part of your sales story
Buyers facing higher monthly payments are more focused than ever on what sits behind the brochure: build standards, aftercare and protection. A robust, lender-accepted 10-year latent defects policy, backed by a recognised code of practice, is tangible reassurance – especially in a market still scarred by headlines about defects and remediation.
4. Plan your pipeline with flexibility in mind
With forecasts pointing to steady rather than explosive growth, phasing and optionality matter. Schemes that can be built, funded and sold in sensible stages – each fully wrapped with technical auditing and warranty – give you the ability to respond if mortgage pricing, tax policy or buyer sentiment shifts along the way.
The opportunity in “cautious”
Cautious optimism might not be as exciting as a boom – but it’s often where the best, most disciplined projects are delivered.
If base rates and mortgage costs drift lower over 2026 as expected, demand will gradually strengthen. The developers who will benefit first are those who have already done the unglamorous work: securing lender-friendly warranties, embedding technical quality, and building schemes that lenders, brokers and buyers can trust.
That’s exactly where Build Warranty® sits – helping you turn today’s improving conditions into tomorrow’s completions.
For all warranty enquiries, contact Build Warranty Group at +44 (0)20 7123 4567 or info@buildwarranty.co.uk. Visit us at www.buildwarranty.co.uk
