At Winkworth, we’re seeing renewed optimism begin to filter through the London property market as the outlook for interest rates becomes clearer.
After a prolonged period of elevated borrowing costs and uncertainty, fresh signals from the Bank of England suggest that further rate cuts remain firmly on the table for 2026 — a development that could have meaningful implications for buyers, sellers, landlords and investors across the capital.
A Narrow Vote Signals a Turning Point
The Bank of England recently held the base rate at its December level, but the decision was far from unanimous. Five members of the Monetary Policy Committee voted to keep rates unchanged, while four supported a further 0.25% cut to 3.5%. Governor Andrew Bailey ultimately cast the deciding vote.
Such a tight split is significant. It points to a central bank that is edging closer to easing monetary policy again, rather than one firmly committed to holding rates higher for longer. Market analysts now believe that the next cut could arrive as early as March or April, with expectations building that two further reductions could follow later in the year.
Inflation Falling Faster Than Expected
Alongside the rate decision, the Bank published its updated economic outlook for 2026 — and the inflation picture has improved materially. Policymakers now expect inflation to return to the 2% target as early as April, helped by energy price measures announced in the most recent Budget and the fading impact of last year’s sharp price rises.
Crucially, the Bank has revised down its inflation forecast for 2026 from 2.8% to 2.1%, reinforcing the case for looser monetary policy. For the property market, lower and more predictable inflation typically translates into greater confidence among lenders and borrowers alike.
Growth Slows, But Rate Cuts Become More Likely
There is a caveat. The improved inflation outlook partly reflects weaker economic growth. The Bank has downgraded its GDP forecast for the current year from 1.2% to 0.9%, with only modest growth expected through 2027 and 2028.
However, from a housing perspective, slower growth often strengthens the argument for rate cuts.
With inflation under control, the focus can shift toward supporting economic activity — and housing transactions are a key lever in that process.
What This Means for London Property in 2026
For London, and especially Prime Central London, the prospect of further rate cuts is a welcome tailwind:
• Buyers may find affordability improving as mortgage rates ease, unlocking pent-up demand.
• Sellers could benefit from greater confidence and stronger transactional momentum.
• Landlords may see financing costs fall, supporting yields at a time when rental values remain resilient.
• Investors are likely to reassess London property as borrowing conditions improve and longterm fundamentals reassert themselves.
At Winkworth, we’re already seeing early signs of this shift in sentiment, with more enquiries and renewed engagement following months of hesitation.
Preparing for the Next Phase
While interest rate cuts are not guaranteed, the direction of travel is becoming clearer. Those who prepare early — whether by reviewing borrowing options, reassessing pricing strategies, or planning ahead for acquisitions — will be best placed to take advantage of improving conditions.
Talk to Winkworth
If you’re considering buying, selling, letting or refinancing a London property in 2026, our teams across the capital are here to help you navigate the changing landscape.
Contact your local Winkworth office to explore how the next phase of interest rate cuts could work in your favour.
