Despite global economic turbulence and continued political upheaval at home, markets fared well last year. In fact, J.P. Morgan confirms that 2025 was the first year since the Covid pandemic in which all major asset classes delivered positive returns.
This was good news for investors, but that same positivity wasn’t carried into all aspects of the economy.
Inflation remained stubbornly above the Bank of England’s (BoE) 2% target in 2025. The “sticky” Consumer Prices Index (CPI) did, though, lead to consistent drops in interest rates throughout the year. The base rate began 2025 at 4.75% and ended at 3.75%.
Elsewhere, the Guardian reports that unemployment reached a four-year high of 5.1% in the three months to October 2025.
There are reasons for optimism, though, in 2026 and beyond. Keep reading to discover five of them.
1. The Bank of England expects the base rate to continue falling gradually
The BoE sets interest rates as a means to control inflation, and the latter has been broadly falling since the CPI’s 41-year high of 11.1% back in October 2022.
Falling inflation has allowed the central bank to decrease its base rate. Following the latest meeting of the Monetary Policy Committee (MPC) on 17 December 2025, the BoE confirmed that it has dropped the base rate at six consecutive meetings and that the rate is likely to fall gradually further in future.
While lower interest rates aren’t great news for savers, borrowers (including mortgage holders) may well see the cost of their borrowing decrease in 2026. In fact, FTAdviser reports that lenders HSBC UK and Gen H have already announced the first rate cuts of the year, with others likely to follow.
2. Inflation could fall more quickly in 2026, helping to ease the cost of living
Following the most recent base rate cut, the MPC stated that it expects inflation to reach the BoE’s 2% target “more quickly in the short term” and be “more stable in the medium term”.
Latest figures from the Office for National Statistics (ONS) confirm that inflation for the 12 months to November 2025 (as measured by the CPI) was 3.2%.
This is certainly a reason to be optimistic for the year ahead. The last few years have been tough for UK consumers struggling with stubbornly high prices, dating back as far as the end of the coronavirus lockdowns in 2021.
3. The Resolution Foundation sees 2026 as a turning point for UK productivity growth
In its ‘New Year Outlook 2026’, the Resolution Foundation suggests that 2026 could be a pivotal year and a turning point for UK productivity growth.
The thinktank does warn of the potential for increased unemployment in the short term. It hopes, though, that increased productivity will ultimately lead to a rise in living standards over the medium term.
4. House prices look set to rise as the market stabilises
The Halifax House Price Index confirms modest annual growth of just 0.3% for 2025. The average UK home now costs £297,755.
Reasons for this slow rise in average house prices included falls in both November (0.1%) and December (0.6%), largely resulting from Autumn Budget uncertainty.
2026 is set to bring increased stability to the housing market, which could spell rising house prices and good news for homeowners.
Falling interest rates and an easing of inflation could spell a market rebound, with Halifax forecasting rises of 1% to 3% for 2026.
5. Globe IFA remains on hand to allay your financial concerns
2025 was a turbulent and unpredictable year for geopolitics and global markets, and yet investments generally performed well.
Where long-term planning is concerned, the key is often to cut out the noise of world events (even those close to home) and focus on your overall goals. Remember that if these goals haven’t changed, it’s unlikely your plans will need to.
At Globe IFA, our expert team has decades of combined experience in the financial sector, watching over global markets and changing legislation.
Following the Autumn Budget, frozen thresholds, allowance changes, and tax rises will take effect over the coming months and years. It’s only natural to be concerned, so get in touch.
Get in touch
If you have any questions about upcoming tax changes or any aspect of your long-term plans in 2026 and beyond, please get in touch. Email hello@globeifa.co.uk or call us on 020 8891 0711 to discuss how Globe IFA’s expert financial advisors can help you manage your long-term financial plans.
Please note
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
