UK house prices edged higher in January, signalling a more positive start to the year for the housing market. New figures released by Nationwide show that the average property price now stands at £270,873, following a monthly increase of 0.3% once seasonal effects are taken into account. On an annual basis, price growth strengthened to 1%, up from 0.6% in December, suggesting that confidence among buyers may be gradually returning.
This improvement comes after a quieter period towards the end of 2025, when uncertainty around possible property tax changes ahead of the autumn Budget caused many households to delay moving decisions. While activity slowed during that period, the latest data indicates that the market is beginning to regain momentum as financial conditions become more favourable.
Nationwide’s chief economist, Robert Gardner, explained that the start of 2026 has brought a modest uplift in house price growth. He noted that although increases remain relatively restrained by historical standards, the upward trend reflects easing affordability pressures and greater stability in mortgage markets.
Mortgage lending has remained resilient throughout recent months. Despite wider economic uncertainty, the number of mortgages approved for house purchases has stayed close to pre-pandemic levels. This suggests that underlying demand for housing remains strong, even if buyers are proceeding with greater caution.
One of the most notable developments over the past year has been the improvement in affordability across much of the UK. Falling mortgage rates, combined with steady wage growth, have helped reduce the financial strain on prospective buyers in many regions. This shift has made homeownership slightly more accessible after several years of rising costs.
Northern Ireland was the only area to see affordability worsen, driven by stronger house price growth relative to earnings. Elsewhere, buyers have generally benefited from slower price rises and better borrowing conditions.
London once again recorded the biggest improvement in affordability for the second year in succession. This was due to relatively weak house price growth in the capital, alongside solid increases in earnings and lower interest rates. Even so, London remains by far the least affordable region in the country, with buyers needing significantly higher incomes to purchase a home.
Regional differences in affordability are becoming increasingly influential in shaping market behaviour. In London, first-time buyers typically earn around 45% more than the average regional income, highlighting how challenging it remains for many households to enter the market. In contrast, areas such as the Midlands and Scotland present a more balanced picture, where buyer incomes are often closer to local averages.
These regional gaps have created a clear divide between those who aspire to buy and those who are financially able to do so. Nationwide said this divergence is contributing to uneven patterns of recovery across the UK, with some regions seeing stronger demand than others.
Looking ahead, Nationwide expects market activity to improve gradually over the coming quarters, provided affordability continues to strengthen. Wage growth has consistently outpaced house price increases, and mortgage rates have trended lower over the past year, offering buyers more financial breathing space.
Other analysts have echoed this cautiously optimistic outlook. Many believe that easing borrowing costs and stronger real wages will help stabilise the housing market, even though households remain wary of broader economic risks.
Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, said the sharp fall in mortgage rates over the past year has played a major role in improving affordability. She pointed out that six interest rate cuts since August 2024 have helped reduce monthly repayments for many borrowers.
She added that lower inflation, despite occasional fluctuations, and stronger real wage growth should help support housing market confidence. However, she warned that consumer sentiment remains fragile, with many families still concerned about job security and the lingering impact of high living costs.
Markets currently expect the Bank of England to hold interest rates steady at its next policy meeting while it assesses new economic data. This cautious approach reflects the balance policymakers are trying to strike between controlling inflation and supporting economic growth.
Karen Noye, mortgage expert at Quilter, described the housing market as being in a holding pattern rather than entering a downturn. She said the current environment suggests stability, with mortgage pricing already much improved compared with this time last year.
She believes that as further interest rate cuts are gradually introduced, monthly repayment pressures will continue to ease. This should help rebuild buyer confidence and encourage more households to consider moving.
Rather than a sudden surge in demand, experts expect a slow and steady increase in market activity over the course of the year. Buyers are likely to re-enter the market cautiously, responding to improved financial conditions and clearer economic signals.
Nationwide also highlighted that first-time buyers made up a growing share of transactions during 2025. This reflects the easing of affordability constraints and the impact of falling mortgage rates, which have made entry-level purchases more achievable for some households.
According to Nationwide’s main affordability index, a buyer earning the average UK salary and purchasing a typical first-time buyer property with a 20% deposit would now spend around 32% of their take-home pay on mortgage repayments. This remains slightly above the long-term average of 30%, but is a significant improvement on the peak of 38% recorded in 2023.
These figures suggest that while affordability challenges remain, conditions are moving in a more positive direction for aspiring homeowners.
Nathan Emerson, chief executive of Propertymark, said further reductions in interest rates could stimulate additional activity as the year progresses. He explained that although inflation continues to influence the Bank of England’s decisions, gradual base rate cuts would help restore confidence among buyers and sellers.
He added that many people have been waiting patiently for the right moment to move, watching both mortgage rates and house prices closely. As affordability improves, more households may feel encouraged to take their first step back into the market.
Overall, the latest data points to a housing market that is slowly finding its footing after a period of uncertainty. Improved affordability, stable lending levels and easing borrowing costs are helping to create a more balanced environment.
While challenges remain, particularly in high-cost regions such as London, the outlook for the year ahead appears cautiously optimistic. If wage growth continues to outpace house price inflation and mortgage rates remain on a downward path, the foundations for a broader recovery in housing market activity may finally be taking shape.
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