- Average UK house prices rose 0.3 per cent in January.
- Annual prices are now 1 per cent higher than a year ago.
- Economists expect gradual growth, but caution remains.
UK house prices rose modestly in January, reversing an unexpected fall at the end of last year, according to data from Nationwide. The lender said the average home price increased by 0.3 per cent during the month, after slipping by 0.4 per cent in December following the Autumn Budget.
Prices are now 1 per cent higher than a year earlier, with the average home costing £270,873. The figures suggest the market may be regaining balance after a period of uncertainty, although analysts stress that momentum remains fragile.
Economists broadly expect conditions to improve through 2026, helped by easing mortgage rates and fading budget-related nerves. Nationwide has forecast price growth of 2 per cent to 4 per cent this year, while consultancy Capital Economics is predicting a rise of around 3.5 per cent.
Affordability improves, but pressure lingers
Robert Gardner, Nationwide’s chief economist, said housing activity slowed towards the end of 2025, “most likely reflecting uncertainty around potential property tax changes before the budget,” as quoted in a news report. He added that mortgage approvals remained close to pre-pandemic levels and that activity could recover in the coming quarters if affordability continues to improve.
He noted that a first-time buyer on an average UK income, purchasing with a 20 per cent deposit, would now spend around 32 per cent of their take-home pay on monthly mortgage costs. That is slightly above the long-term average of 30 per cent, but well below the peak of 38 per cent seen in 2023.
Affordability has been helped by wage growth outpacing house prices and a gradual fall in mortgage rates. Still, regional gaps remain, with parts of the country, including Northern Ireland, seeing affordability worsen due to stronger local price growth.
Despite the improved headline numbers, some property experts say the outlook remains uncertain. Tom Bill of estate agent Knight Frank reportedly said mortgage approvals in December were 9 per cent below the five-year average, suggesting demand is still fragile. He also warned that expectations for multiple interest rate cuts this year have faded, which could keep prices and transaction levels under pressure.
The Bank of England cut interest rates from 4 per cent to 3.75 per cent in December after inflation eased to 3.2 per cent in November. While that remains above the Bank’s 2 per cent target, policymakers have indicated that further cuts may be limited.
