UK Economy Grows 0.7%: Why It Could Mean Another Rate Rise

By Lisa Hayes · 13 November 2026

The UK economy grew by 0.7% between July and September 2026, according to the Office for National Statistics' first estimate published on Thursday 12 November. That is good news for jobs and the public finances. For homeowners, though, it cuts the other way: stronger growth makes another Bank of England rate rise in December more likely, which means mortgage costs for your buyers are unlikely to come down any time soon.

If you're thinking of selling in the next six to twelve months, this is the figure that quietly changed the maths. Let me explain why, what the headlines are missing, and what I'd actually do with this information if it were my house on the market.

• +0.7%GDP growth, Q3 2026 (ONS)
• +1.9%growth on a year earlier (ONS)
• -4.7%private housing new work, Q3 (ONS)
• ~75%market odds of a December rate rise (reported by Beaver Online)

What exactly did the ONS announce?

The ONS's GDP first quarterly estimate, UK: July to September 2026 shows the economy growing by 0.7% in the third quarter. That's a step up from 0.5% in the second quarter and 0.6% in the first. Compared with the same quarter a year ago, the economy is 1.9% bigger.

The monthly picture is steadier than the quarterly number suggests. July grew by 0.4%, August was revised down to flat (0.0%, from an initial 0.1%), and September added 0.2%. The ONS describes the three months to September as "the ninth consecutive three-month on three-month growth". Nine in a row. That's not a blip.

On a per-person basis, the ONS says real GDP per head rose by 0.7% in the quarter and is up 1.7% on a year ago. Household spending grew 0.6% in the quarter and 1.8% on the year, which the ONS says was driven by spending on transport and housing.

Grant Fitzner, the ONS's chief economist, said the economy "grew robustly in the third quarter", pointing to services and businesses linked to artificial intelligence (as quoted by City AM and reported by Beaver Online).

Where did the growth actually come from?

This is where it gets interesting, and where I'd urge you not to read "the economy is booming" as "the housing market is about to pick up". The growth was narrow.

Sector (ONS, Q3 2026)	Quarter-on-quarter	What it tells a homeowner
Services (overall)	+0.9%	The engine of the whole quarter
Information & communication	+2.1%	Led by computer programming and consultancy, up 4.4%
Consumer-facing services	+0.5%	People are spending, but more modestly
Production	+0.1%	Broadly flat
Construction	-0.7%	Building is shrinking
Private housing new work	-4.7%	Fewer new homes being built
Repair & maintenance	+0.5%	Owners improving rather than moving?

The ONS was unusually direct about the source. Computer programming and consultancy, it says, "has been the largest driver of GDP growth across 2026, with evidence that many of the businesses reporting the largest increases in turnover are involved in activities related to artificial intelligence and cloud computing." It adds, fairly, that "it is difficult for us to quantify the exact impact".

So a big slice of this quarter's growth came from tech firms selling AI and cloud services. That's real economic activity. But it doesn't put a deposit in the hands of a 31-year-old nurse in Stoke trying to buy her first flat, and it doesn't make a chain in Kent any less fragile.

Construction, the sector that touches housing most directly, went backwards. Overall construction output fell 0.7% in the quarter and is 1.7% lower than a year ago. New work fell 1.6%, and private housing new work dropped 4.7%. Mortgage Soup's market commentary adds that construction orders fell 25.3% year-on-year in Q3, following an 18.5% fall in Q2.

I find the repair-and-maintenance figure quietly telling. It rose 0.5%. When moving gets expensive, people stay put and do the kitchen instead. That's not proof of anything on its own, but it fits everything else we're seeing.

Why is good economic news bad news for mortgages?

Because the Bank of England isn't trying to make the economy grow faster right now. It's trying to get inflation down.

On 5 November the Bank raised Bank Rate from 3.75% to 4%, its first increase in more than three years. I wrote about what that rise meant if you're selling at the time. CPI inflation was 3.5% in September, according to the ONS, and the Bank expects it to go higher before it comes down.

When the economy is weak, the Bank can tell itself that slowing demand will do some of the inflation-fighting for it. When the economy grows 0.7% in a quarter, that argument gets harder to make. Stronger growth means more spending, more pressure on prices, and less reason to hold back.

Markets reacted the way you'd expect. According to Walter Avrili, technical director at Mortgageforce, writing in Mortgage Soup, swap rates rose "between 3.1 and 5.7 basis points across the curve" after the figures, and 10-year gilt yields edged back above 5.2%. Markets were, in his words, "pricing in one increase by December and another by March". Beaver Online, citing Global Banking & Finance, reported that markets priced in "roughly a 75% chance" of another increase at the December meeting.

Avrili called the swap move "another unwelcome development for mortgage markets following the increases seen earlier in the week", and said "another Bank Rate increase in December looks increasingly likely".

Swap rates are what lenders use to price fixed-rate mortgages. When swaps go up, fixed rates tend to follow within days. That's the bit that hits your buyer.

Not everyone agrees on timing. Beaver Online reports that ING sees February as more likely than December, and that Société Générale's Kenneth Broux suggests the next decision could be a split vote. Avrili himself cautions that "multiple increases over the next year are far from a certainty". Fair enough. Nobody knows for sure. But the direction of travel for borrowing costs over the winter now points up, not down, and that's what matters for anyone pricing a home.

When is the next Bank of England decision?

The Monetary Policy Committee's next announcement is on Thursday 17 December 2026. Before then, the ONS publishes October's inflation figures and the monthly GDP estimate for October (due 11 December). Both will feed into the decision.

If you're listing in the run-up to Christmas, that's the window you're working in. Buyers who are mid-search will be watching the same headlines you are, and some will be rushing to lock in a mortgage offer before rates move again. That urgency can work in your favour, briefly.

What's already happened to mortgage costs since the November rise?

Quite a lot, quite quickly. MoneySavingExpert has been tracking lender responses to the 5 November rise. Most lenders are passing on the full 0.25 percentage points to tracker and standard variable rate (SVR) customers, which MSE says is "equivalent to roughly £15 a month more in repayments per £100,000 of mortgage debt".

Lender	SVR change (per MoneySavingExpert)	From
Barclays	5.74% → 5.99%	1 December
Nationwide	6.49% → 6.74%	1 December
Halifax	7.24% → 7.49%	1 December
Clydesdale	6.74% → 6.99%	16 November
Principality BS	6.8% → 7.05%	1 December

Those are existing borrowers. For buyers, the bigger issue is fixed rates, which move with swap rates rather than waiting for the Bank. MSE notes that the best two- and five-year fixes are now around 5%, while typical SVRs sit between 6% and 7%. And the GDP figures pushed swaps higher again on Thursday.

Here's a rough illustration of why that matters. Using MSE's rule of thumb of around £15 a month per £100,000 for every 0.25 percentage point, a buyer borrowing £250,000 would be paying about £37 more a month for each quarter-point rise. If markets are right and there are two more rises by March, that's roughly £75 a month more than they'd budgeted for in October. That's my arithmetic on MSE's figure, not a forecast, but it gives you a sense of scale.

Now think about what your buyer does with that. They either borrow less, offer less, or stop looking.

Is the housing market about to pick up because the economy is growing?

I wish I could say yes. The honest answer is: not yet, and not because of this.

Colin Bradshaw, CEO of property data firm TwentyCi, put it well in The Intermediary: "we shouldn't assume that stronger economic growth will immediately translate into a significant uplift in housing market activity." He added: "Our latest data shows a market where supply is continuing to grow. However, buyer demand remains more subdued."

That matches what the surveyors are telling us. Just yesterday I covered the RICS October survey, where new buyer enquiries came in at a net balance of -24%, agreed sales fell to -24%, and twelve-month sales expectations hit their weakest level since July 2023. Lloyds' own index shows prices down 1.2% on the year, the biggest annual fall in three years. Nationwide has annual growth at just 0.5%.

Put that together and you get a split-screen economy. On one side, AI and cloud firms growing fast and pulling the GDP figure up. On the other, a housing market where buyers are thinner on the ground and more cautious about every pound of borrowing.

Richard Pike of Phoebus Software warned in The Intermediary that the Office for Budget Responsibility expects real household disposable income per person to fall by 0.6% next year. If that forecast holds, households will feel poorer in 2027 even as the headline economy grows. That's not the backdrop for a buyer-led recovery.

KPMG's chief economist Yael Selfin, quoted in Mortgage Soup, expects growth to stall in the fourth quarter as energy prices and interest rates weigh on spending. Continuum Economics, reported by Beaver Online, expects Q4 growth of around 0.2%. So even the good news may not last.

Are the headlines overselling this?

A little, yes. "Economy grows at fastest pace in a year" is accurate. But I'd push back on any suggestion that this is a turning point for ordinary households, for three reasons.

First, the growth is concentrated. Information and communication grew 2.1%, while consumer-facing services managed 0.5% and construction shrank. The ONS itself is careful about how much of the boost it can pin on AI.

Second, August was revised down to zero. The quarter looks strong partly because July was strong. September's 0.2% is fine, but it's not a surge.

Third, and most important for you: the market isn't treating this as good news for borrowers. Gilts and swaps went up. That's the market's verdict on what this means for mortgages, and it's a clear one.

None of this means the economy is in trouble. It isn't. It means the thing that would most help house sales right now, cheaper mortgages, has just moved a bit further away.

Is there any good news in this for sellers?

There is, and I don't want to bury it.

The point about recession risk is worth dwelling on. The worst housing markets of the last 40 years came with rising unemployment: forced sales, repossessions, buyers vanishing altogether. We're not seeing that. What we're seeing is a market that's being slowly squeezed on affordability, which tends to mean gentle price falls and longer selling times rather than a crash. Uncomfortable, but manageable if you price sensibly.

What does this mean if I'm selling my home?

It depends a lot on your situation. Here's how I'd think about it.

If you need to sell in the next three months

Your buyers are borrowing in a market where rates are more likely to rise than fall before your sale completes. Every week a buyer spends deciding is a week in which their mortgage offer could get more expensive. That makes realistic pricing more important, not less.

Look at what's actually sold near you, not at asking prices. Our guide to working out what your house is worth walks through how to do that properly. If an agent is quoting you a figure well above recent sold prices on your street, ask them to show their working.

And think about your chain. A buyer who has a mortgage offer in principle today may find the numbers don't work in six weeks' time. If your onward purchase depends on several sales lining up, the risk of something falling over goes up when rates are moving. Our guide on fixing a broken property chain is worth reading before you agree anything.

If you're planning to sell in spring 2027

Don't plan on the assumption that rates will have come down by then. Markets are currently pricing in a rise by March, not a cut. That could change, of course; forecasts often do. But planning for the more likely scenario rather than the one you'd prefer is just good sense.

Use the winter to get your paperwork in order, sort any obvious repairs, and understand your local market. When spring comes, you want to be ready to list at the right price from day one rather than starting high and chasing the market down.

If you're on a tracker or SVR and thinking of moving

You're feeling this directly. If your payments are going up from 1 December and you were already on the fence about moving, it's worth getting a proper view of your options now. Moving to a fixed rate, porting, or selling and downsizing are all different routes with different costs. Speak to a broker before you make any decision about your mortgage. I'm not a mortgage adviser, and the right answer depends on your circumstances.

If your fixed rate ends in the next six months

MSE's advice is to start looking at new deals three to six months before your fix ends. Many lenders let you secure a rate in advance. If you're planning to sell around the same time, think about whether you want a product you can port, or one with low or no early repayment charges. That flexibility can be worth paying a little extra for.

What should I do right now?

If I were selling today, my priorities would be simple.

Get an honest number. Not the most flattering valuation, the most accurate one. Agents compete for instructions, and some will quote high to win your business. Our free house valuation guide explains how to cross-check what you're being told.

Know your costs. Agent fees, conveyancing, removals, possibly early repayment charges on your mortgage. Our breakdown of the costs of selling a house is a good place to start, so the figure you're working from is the one you'll actually walk away with.

Have a plan B. If your house has been on the market for months with little interest, or you're up against a deadline, an open-market sale isn't your only option. Selling to a cash house buyer takes mortgage rates out of the equation entirely, because there's no buyer mortgage to arrange. The trade-off is price: cash buyers typically pay less than full market value, so it's a choice about certainty and speed versus getting top pound. Our guide on what percentage of market value cash buyers pay sets out what to expect, and how to spot the firms worth dealing with.

Watch 17 December. If the Bank raises rates again, expect another round of lender repricing in the days after, and another bump in buyer nerves going into January.

What's the outlook for house prices and mortgages into 2027?

Let me be careful here, because forecasts in this market have been wrong in both directions more than once this year.

What we know: GDP is growing, inflation is above target at 3.5%, Bank Rate is at 4%, and markets are pricing in at least one more rise. Swap rates are higher than they were a week ago. Lenders have been passing on increases quickly.

What that probably means: mortgage rates for new borrowers are more likely to drift up than down over the winter. Buyer demand stays subdued. Prices continue to soften gently, particularly in the south of England, where RICS respondents reported the weakest conditions. Northern Ireland, Scotland and the North West look more resilient based on the same survey.

What could change it: if inflation drops faster than expected, or if Q4 growth stalls as KPMG and Continuum Economics expect, the Bank may decide one more rise is enough, or none. ING already leans towards February rather than December. Any sign that the Bank is done would be welcomed by buyers quickly, and swap rates would ease.

My view? The economy is doing better than many people feared at the start of the year, and that's genuinely positive. But for the housing market, this is a "higher for longer" story. Sellers who accept that, and price accordingly, will sell. Sellers who wait for the market to come back to where it was in spring 2026 may be waiting a while.

Frequently asked questions

How much did the UK economy grow in Q3 2026?

According to the ONS's first estimate, published on 12 November 2026, GDP grew by 0.7% in July to September 2026, up from 0.5% in the previous quarter. It was 1.9% higher than a year earlier.

Will the Bank of England raise interest rates in December 2026?

Nobody can say for certain. After the GDP figures, markets were reported to be pricing in roughly a 75% chance of a rise at the 17 December meeting, though some economists, including ING, see February as more likely.

Does economic growth help house prices?

Over the long run, a growing economy supports jobs and incomes, which supports house prices. In the short term, strong growth can push interest rates up, which makes mortgages more expensive and holds prices back. That's the situation now.

Thinking about your next move?

None of this means you can't sell well right now. It does mean you need to go in with your eyes open: a realistic price, a clear plan for your chain, and an understanding of what each route to sale will actually net you.

If you'd like to see your options side by side, including open-market, auction and cash-buyer routes, you can compare offers for your home here. It's free, there's no obligation, and you'll get a clearer picture of what's realistic before you commit to anything.

Lisa Hayes, founder, Ready Steady Sell. Sources: Office for National Statistics GDP first quarterly estimate (July to September 2026) and monthly GDP estimate (September 2026), both published 12 November 2026; Mortgage Soup; The Intermediary; Beaver Online; MoneySavingExpert; RICS UK Residential Market Survey (October 2026). This article is general information, not financial or mortgage advice.