Easing mortgage rates could allow for modest house price growth next year without materially changing affordability pressures for first-time buyers or homemovers, according to new analysis from Moneyfactscompare.co.uk.
The findings draw on consumer behaviour data from people comparing mortgage deals on Moneyfactscompare.co.uk in 2025, alongside Moneyfacts average mortgage rates. Together, the figures suggest that falling borrowing costs may create limited room for price movement, even as deposits and loan sizes remain elevated across buyer groups.
Among first-time buyers, borrowing levels stayed high through 2025. Typical purchasers took out loans of around £236,000 against an average property value of £310,000, resulting in an average loan-to-value ratio of 78%. That left buyers needing deposits of roughly 22%, a barrier that continues to shape access to the market.
Homemovers operated from a stronger equity position, although purchase prices were higher. The typical homemover borrowed about £251,000 when buying a home valued at around £466,000. Average LTVs sat at 58%, reflecting equity of approximately 42%.
Remortgage customers showed the lowest leverage of all groups. A typical borrower refinanced around £215,000 on a property worth roughly £460,000, equating to an average LTV of 50%. With half of the property value held as equity, this group appears best placed to benefit from easing rates.
Mortgage pricing provides the backdrop to these shifts. Markets currently expect the Bank of England to cut the base rate from 3.75% to between 3.25% and 3.5% over the course of the year, a move that would gradually filter through to new mortgage deals.
“After more than three years of higher borrowing costs, even small cuts in mortgage rates can have a meaningful effect on buyer behaviour,” said Adam French, head of news at Moneyfactscompare.co.uk. “With markets expecting at least one further 0.25 percentage point cut to the Base Rate, the mortgage landscape in 2026 may be more forgiving than at any point since 2021.”
“Our modelling suggests that easing rates may make modest house price growth possible without stretching affordability further, an important shift after the intense affordability squeeze of 2022–2025,” he noted.
However, the experience varies sharply by borrower type. “First-time buyers still face the steepest challenges, with many stretching to higher LTV deals given the need to save a considerable deposit,” French said. “In contrast remortgage borrowers - who typically hold far more equity and are unlikely to need to borrow more - stand to benefit most from easing rates.”
“Any expectation of more substantial growth should be tempered by the fact that borrowing costs remain well above the ultra-low levels of the 2010s,” he added. “Even with rate cuts, affordability remains tight.”
“Lower rates remove a headwind rather than create a tailwind, making modest house price growth possible, but not guaranteeing it,” French said. “Unless rates fall further or incomes rise faster than expected the headroom for growth is likely to remain tight.”
