House Prices Falling in 2026 — What It Means for How Much Equity You Could Release

What the latest data shows

Savills, one of the UK's most closely watched property forecasters, revised its 2026 outlook in June 2026 from a previously forecast gain of 2% to a fall of 2% for the UK average — and a steeper 4% fall for London specifically (source: Mortgage Solutions, 1 June 2026). The reversal reflects a combination of factors: rising mortgage rates, a slowdown in transaction volumes, and a surge in supply partly driven by landlords exiting the market ahead of the Renters' Rights Act.

Nationwide's May 2026 house price index, published 1 June 2026, adds further evidence of the slowdown. Annual house price growth slowed to 1.7% in May, down from 3.0% in April — the sharpest single-month deceleration in recent memory. On a monthly basis, prices fell 0.6%. The average UK house price now stands at £278,024.

Nationwide's chief economist Robert Gardner attributed the softness to Middle East uncertainty and rising energy prices weighing on consumer confidence. The data represents the first monthly price fall recorded in the seasonally-adjusted series in 2026.

Why landlord sell-offs are adding to supply

One structural driver of the supply increase is the Renters' Rights Act, which received Royal Assent in May 2026 and abolishes Section 21 "no-fault" eviction notices. Many private landlords — particularly those holding properties with relatively modest yields — have decided to sell rather than operate under the new regime. The resulting increase in available stock is putting downward pressure on prices in certain regions and segments.

This is not a speculative forecast: estate agents and conveyancers have reported a noticeable uptick in landlord-to-sale conversions since the Act came into force. Where landlord sell-offs concentrate in particular local markets, the price effect can be more pronounced than national averages suggest.

How falling house prices affect equity release

The amount you could release through a lifetime mortgage is calculated as a percentage of your property's current market value. This percentage — the loan-to-value ratio, or LTV — varies by provider and by age, but as a general guide, lenders typically allow older borrowers to access higher percentages of their property's value.

The practical impact of a 2% fall is straightforward to illustrate. Consider a property currently valued at £400,000:

• A 2% fall reduces the value to £392,000 — a reduction of £8,000
• For a 68-year-old borrower at a typical maximum LTV of 35%, the maximum release falls from £140,000 to £137,200
• That difference of £2,800 is not trivial when equity release is being considered for a specific purpose such as home adaptations, care funding, or supporting family members

In areas where Savills forecasts a 4% fall — particularly in London — the reduction in available equity is twice as significant. On the same £400,000 property, a 4% fall to £384,000 would reduce available equity by £5,600 at 35% LTV.

You can explore the numbers in more detail using our lifetime mortgage calculator, or read how equity release works for a full explanation of how LTV limits are applied.

The five-year picture: long-term security remains

Savills' revised short-term forecast does not indicate a structural collapse in UK property values. The same forecaster projects 18.5% cumulative house price growth over the five years to 2030. That longer-term outlook is relevant to equity release in two ways.

First, a lifetime mortgage is typically a long-term product. For most borrowers, the loan will remain outstanding for many years — often until death or entry into long-term care. Over that timeframe, short-term price softness is likely to be recovered. The equity protection and no-negative-equity guarantees required under Equity Release Council standards provide important safeguards regardless of market movements.

Second, those who act during a modest price softness and then see values recover have a more favourable equity position in later years than the initial release percentage alone would suggest. Long-term property value growth continues to underpin the security of equity release as a product category.

Rising mortgage rates and RIO mortgages

For homeowners considering a retirement interest-only (RIO) mortgage rather than equity release, the current rate environment introduces a separate consideration. Two-year fixed rates have risen to 5.56% as of June 2026. For older borrowers whose affordability assessment depends on pension or rental income, higher monthly interest payments can affect whether a RIO mortgage remains a viable option.

RIO mortgages are a different product from lifetime mortgages: the borrower makes monthly interest payments, and the capital is only repaid on sale of the property. They can be well-suited to borrowers with sufficient regular income to service payments without burdening their monthly budget. But the affordability calculation is more sensitive to rate changes than a lifetime mortgage, where no monthly payments are required.

We cover the differences in detail at retirement interest-only mortgages.

Should you act before prices fall further?

No adviser can guarantee the direction of house prices over any given period, and it would be wrong to present this as a reason to rush a major financial decision. What the data does suggest is that the window of peak valuations in the current cycle may have passed, and that waiting for a higher valuation may not be the most reliable strategy for some homeowners.

The decision about when to proceed with equity release should be based on your personal circumstances, financial needs, and a full review of the options available to you — including whether equity release, a RIO mortgage, or another approach is most appropriate. FCA-regulated advice is essential before making any commitment.

There is no obligation at any stage. A Verity Home adviser could release a personalised assessment of how much you could access based on your current property value, your age, and your objectives — and will explain all the implications clearly before any decision is made.

Read more: How equity release works • Lifetime mortgage calculator • Retirement interest-only mortgages