UK home sales post first significant drop since summer as buyers stay cautious heading into 2026
UK residential property transactions fell for the first time in a meaningful way since last summer, as buyers adopted a wait-and-see approach amid lingering affordability pressures and uncertainty over the pace of further interest-rate cuts.
Seasonally adjusted figures from HM Revenue & Customs, released on February 27, 2026, show 94,680 residential transactions completed in January, a 5% drop from December 2025’s 99,710. The reading was also marginally lower (less than 1%) than the 95,430 recorded in January 2025.
Non-seasonally adjusted volumes came in at 79,880, reflecting the typical post-Christmas lull and marking a steeper 24% decline from the prior month.
The data marks the first significant monthly dip since summer 2025, according to HMRC’s own commentary, after a period of relative stability that had fueled hopes of a sustained recovery.
Seasonal factors at play – but caution is the bigger story
Estate agents were quick to note that January is traditionally one of the quietest months of the year, as households reassess budgets after the festive period. Yet several analysts went further, pointing to broader buyer hesitation.
“Households remain cautious. Buyers are waiting for clearer evidence that further rate cuts are approaching and that any downward momentum in mortgage pricing will be sustained rather than tactical. The resilience in December’s numbers suggests transactions are being driven by need rather than opportunism, but an improving rate outlook would provide exactly the confidence boost required to lift activity out of its holding pattern,” said Ian Futcher, Financial Planner at Quilter.
“The opportunity for the market in 2026 is that even modest reductions in mortgage rates would have a disproportionate confidence effect after two years of elevated borrowing costs. If the rate path moves in the direction many expect, today’s stability could finally tilt into a gentle recovery.”
The Bank of England held its base rate at 3.75% in its February meeting on a tight 5-4 vote, with markets now pricing in a strong chance of a 25-basis-point cut as soon as the March 19 decision.
Average two-year fixed mortgage rates have eased to around 3.5%–3.9% for lower loan-to-value deals in early March 2026, according to lender announcements from Nationwide, Santander, and others, down from peaks above 6% in 2023–2024 but still elevated for many borrowers who locked in far cheaper deals years earlier.
Outlook brightens as rate cuts loom and pent-up demand builds
Despite the January blip, the consensus among property professionals is one of cautious optimism for the rest of 2026. Tom Bill, head of UK residential research at Knight Frank, said activity “should recover in the coming months as plans put on hold are reactivated and mortgage rates head lower.”
Nicky Stevenson of Fine & Country pointed out that volumes were only marginally below last January, itself boosted by pre-stamp-duty-change frenzy in early 2025, calling the dip “more to seasonal patterns than any loss of confidence.”
Iain McKenzie, chief executive of the Guild of Property Professionals, summed it up: “While transaction volumes may have softened at the start of the year, the outlook for 2026 remains positive.”
Forecasters broadly expect:
- House-price growth of 1%–4% for the full year (Halifax: 1–3%; Nationwide: around 2%; Rightmove: ~2%).
- Transaction volumes to stabilise or modestly rise as affordability improves and more sellers bring stock to market.
The RICS UK Residential Market Survey for January already showed improving buyer enquiries and the strongest 12-month sales outlook since late 2024.
