Average UK house prices rose by 0.3% in January, bouncing back from a 0.4% fall in December and signaling renewed buyer confidence after months of uncertainty. The increase brings the average property value to £270,873, with annual growth reaching 1.0%, according to Nationwide Building Society.
The modest upturn follows a turbulent end to 2025, when activity dipped amid concerns over potential property tax changes ahead of the Budget. Mortgage approvals remained close to pre-pandemic levels despite the hesitation. Robert Gardner, Nationwide's chief economist, said in the society's January report: «The start of 2026 saw a slight pick-up in annual house price growth, which rose to 1.0% in January, after slowing to 0.6% in December.»
Affordability has improved over the past year as earnings growth outpaced house price rises and mortgage rates steadily declined. Monthly mortgage payments for a first-time buyer property with a 20% deposit now consume 32% of take-home pay, down from a 2023 peak of 38% but still above the long-term average of 30%. Gardner explained: «Affordability constraints have eased over the past year, thanks to earnings growth outpacing house price growth and also a steady decline in mortgage rates. This has helped underpin buyer demand.»
Market momentum builds
Iain McKenzie, chief executive of the Guild of Property Professionals, said: «After a hesitant end to last year, this modest rise reflects renewed buyer confidence and a sense that the market is regaining momentum.» He noted that buyers have returned to the market in early 2026, encouraged by easing mortgage rates and a more predictable economic backdrop.
Several lenders reduced mortgage rates in January. Jason Tebb, president of OnTheMarket, said most agents reported a better start to 2026 than the first quarter of 2025. Amy Reynolds, head of sales at London-based estate agency Antony Roberts, assessed: «While this is not a runaway market, it is a far healthier one than a year ago.»
Regional differences persist
Affordability pressures remain most acute in southern England. Gardner noted in the Nationwide report: «Affordability pressures remain pronounced in the South of England, whilst in the North, Yorkshire and the Humber and Scotland, mortgage payments as a share of take-home pay are slightly below their long-run average.» Northern Ireland has seen affordability deteriorate over the past year due to strong house price growth.
Outlook for 2026
Gardner expects housing market activity to recover in coming quarters if the improving affordability trend continues. A growing supply of homes is giving buyers more choice and helping control price growth. McKenzie advised: «Sellers will need to remain realistic on pricing and responsive to local market conditions to achieve successful sales.»
The Bank of England delivered a quarter-point rate cut in December, but markets expect the Bank to hold steady at its next decision this week. Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, said: «The combination of falling interest rates, moderating inflation – albeit with a few bumps along the way – and stronger real wage growth should help underpin housing market confidence.»
Tom Bill, head of UK residential research at Knight Frank, warned that prospects for two rate cuts this year have faded due to stronger-than-expected UK economic data. He said: «The absence of political drama over the next few months would help confidence grow, but that might be wishful thinking.»
Note: This article was created with Artificial Intelligence (AI).
