Mortgage rates for new loans have declined to their lowest level in four years

Some 40% of homes currently listed for sale are now cheaper to purchase with a mortgage than to rent, assuming a 20% deposit, according to Zoopla, as declining borrowing costs help many get on the housing ladder.

The share has increased from 25% a year ago, reflecting lower mortgage rates and changes in how banks assess borrowers. Lenders are now typically stress testing at 6.5%, down from 8.5% last year, allowing more households to qualify for loans large enough to compete with rental costs.

Mortgage rates for new loans have declined to their lowest level in four years. Two-year and five-year fixed deals are now available below 4% for the first time since 2022, supporting a rebound in demand even though rates are unlikely to drop much further this year.

The improvement in affordability is also being underpinned by wage growth. Average earnings have risen faster than house prices for three straight years, gradually repairing the damage done during the surge in borrowing costs.

The shift is most pronounced in northern England and Scotland. More than half of homes for sale are cheaper to buy than rent in the North East and Scotland, followed by the North West. In London and parts of the Midlands, fewer than 40% of homes are cheaper to buy, reflecting higher price levels and stamp duty costs.

Sales agreed are running at one of the strongest February levels of the past decade, though they are still 3% below the strong start to 2025. At the same time, February is on track to record the highest number of new listings for the month in 10 years, leaving 6% more homes on the market than a year ago.

Despite firmer demand, price growth remains modest. UK house prices were 1.3% higher in the 12 months to January, down from 1.8% a year earlier. Northern Ireland recorded the fastest annual growth at 8%, followed by the North West at 3.3%, Scotland 2.8%, and the North East 2.5%.

Among major cities, Liverpool and Glasgow have led growth with 4% and 3% rises respectively, while Manchester and Sheffield rose 2.9% and 2.6%, Newcastle 2.6%, Leeds 2.2%, Birmingham 1.5%, Edinburgh 1.4% and Cardiff 1.2%.

In contrast, prices dropped slightly in London, Southampton, Portsmouth, Cambridge and Bournemouth, while Bristol, Oxford and Aberdeen saw only marginal gains. Across much of southern England, prices are broadly flat, although declines seen in the second half of 2025 have moderated.

Richard Donnell, executive director at Zoopla, said: Despite improved levels of market activity, subdued house price inflation is good news for buyers and sellers and represents a more stable market. More sellers putting their home on the market shows a strong desire to move home.

Lower mortgage rates and improved affordability of mortgages means now could very well be the best time to buy a home in recent years, especially for first-time buyers with more homes available to buy for less than the cost of renting, he said.

He added: We expect continued modest rates of price inflation over 2026 which will support healthy levels of sales with some wide variations across local markets. Sellers need to seek the advice of local agents to get the right strategy for their home.