UK house price growth edged higher in January, with annual growth rising slightly to 1.0% and prices up 0.3% month-on-month, according to the latest Nationwide House Price Index.
Improved affordability helped support first-time buyer activity throughout 2025.
| Headlines | Jan-26 | Dec-25 |
|---|---|---|
| Monthly Index* | 544.9 | 543.4 |
| Monthly Change* | 0.3% | -0.4% |
| Annual Change | 1.0% | 0.6% |
| Average Price
(not seasonally adjusted) |
£270,873 | £271,068 |
* Seasonally adjusted figure (note that monthly % changes are revised when seasonal adjustment factors are re-estimated)
Robert Gardner, Nationwide’s chief economist, said: “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. Prices increased by 0.3% month on month in January, after taking account of seasonal effects.
“Housing market activity also dipped at the end of 2025, most likely reflecting uncertainty around potential property tax changes ahead of the Budget. Nevertheless, the number of mortgages approved for house purchase remained close to the levels prevailing before the pandemic.
“Housing market activity is likely to recover in the coming quarters, especially if the improving affordability trend seen last year (and explored further below) is maintained.”
Improved affordability supported activity in 2025
According to Nationwide, 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, with first-time buyer activity over the last year continuing to edge higher as a share of house purchases.
Gardner continued: “Our main affordability benchmark shows that a prospective buyer earning the average UK income and buying a typical first-time buyer property with a 20% deposit would have a monthly mortgage payment equivalent to 32% of their take-home pay – slightly above the long-run average of 30% and well below the recent high of 38% recorded in 2023 (as shown in the chart below).
All parts of the UK, with the exception of Northern Ireland, saw an improvement in affordability over the past year. Northern Ireland experienced a deterioration due to strong house price growth over the past year, with mortgage payments now above the long-run average in the region.
For the second year running, London saw the largest improvement in affordability, reflecting relatively weak house price growth in 2025, solid earnings growth and lower interest rates. Nevertheless, the capital remains the least affordable region by a significant margin (see chart above).
Affordability pressures remain pronounced in the South of England, whilst in the North, Yorkshire & The Humber and Scotland, mortgage payments as a share of take-home pay are slightly below their long-run average.
These regional variations in affordability have led to some stark differences emerging between those who would like to buy and those that can do so.
To explore this further, Nationwide looked at how the mean earnings for actual first-time buyers compared to the regional average incomes used in our affordability benchmarks.
“London stands out as the area with the greatest divergence, with actual first-time buyer earnings (for a single borrower) around 45% higher than average incomes in the capital, Gardner explained.
“But in regions where affordability is less stretched, such as the Midlands, actual first-time buyer earnings tend to be much closer to regional averages,” he added. “Moreover, in a few areas, most notably Scotland, the incomes of actual first-time buyers are below the average income in the region, indicating relatively healthy housing affordability.”
Industry reaction:
Amy Reynolds, head of sales at Richmond estate agency Antony Roberts: “While this is not a runaway market, it is a far healthier one than a year ago.
“Transactions are slowly improving and values have proved resilient, particularly where homes are priced realistically.
“We’re seeing far more purposeful buyers than we did in the autumn, and assuming interest rates remain supportive, the spring market looks encouraging with momentum continuing to build.”
Iain McKenzie, CEO of The Guild of Property Professionals: “The latest Nationwide figures show the housing market has begun 2026 on a steadier footing, with prices edging higher and annual growth picking up to 1%. After a hesitant end to last year, this modest rise reflects renewed buyer confidence and a sense that the market is regaining momentum.
“The final quarter of 2025 was dominated by uncertainty, with many buyers pausing decisions ahead of the Autumn Budget. While activity dipped in December, we’ve seen a rebound in demand at the start of this year as buyers return to the market, encouraged by easing mortgage rates and a more predictable economic backdrop.
“The Bank Rate cut in December to 3.75%, alongside intense competition among lenders and the widest choice of mortgage products in nearly two decades, is helping to improve affordability. Although inflation remains a factor and rate cuts are likely to be gradual, lower borrowing costs and rising incomes mean mortgage costs are becoming more manageable than they have been for several years.
“A growing supply of homes for sale is also giving buyers more choice and keeping price growth in check. This should support a healthier level of transactions in 2026, but sellers will need to remain realistic on pricing and responsive to local market conditions to achieve successful sales.”
Nathan Emerson, CEO of Propertymark: “It’s encouraging to see the housing market gathering pace as we head further into 2026. We have witnessed growing consumer confidence over the last twelve months, more competitive mortgage deals being offered by many lenders, and an increase in homes being placed for sale.
“Although inflation continues to play influence on the Bank of England’s base rate decisions, as we progress towards the spring it is hoped we may see further measured base rate cuts, which could further help invigorate overall affordability for many people who may have been cautiously keeping check on the market for their prime moment to jump into the buying and selling process.”
James Nightingall, founder of property search service HomeFinder AI: “Last month, the property market was boosted by house hunters who started their search during the Christmas holidays and lined up viewings for January. The majority of these buyers were keen to move sooner rather than later and didn’t hesitate to make an offer on their chosen property. As mortgage products are improving, and with a potential interest rate cut on the horizon, we expect buyer motivation to only grow stronger over the next few weeks.”
Karen Noye, mortgage commentator at Quilter: “The latest Nationwide house price data reveals the market saw a small uptick in January, but it was far from a roaring start to the year. With prices rising by 0.3% month-on-month and 1.0% over the past year, activity remains relatively subdued.
“This caution is understandable. With two or three base rate cuts expected later this year, many buyers are only tentatively engaging, weighing up whether to move now or wait for slightly cheaper mortgage rates to feed through. As a result, demand is being delayed rather than cancelled, particularly among first-time buyers who remain highly sensitive to affordability pressures.
“Realistically, this means we are unlikely to see a period of rapid house price growth in the near future. Affordability constraints remain a hard limit on how far prices can run ahead, even as borrowing costs begin to ease.
“That said, this looks less like a market losing momentum and more like one in a holding pattern. Mortgage pricing has already improved compared with this time last year, and further rate cuts should gradually ease monthly repayment pressures. As confidence builds, demand is more likely to strengthen steadily through the year rather than surge all at once.”
Damien Jefferies, founder of Jefferies London: “The UK housing market has started the year with real intent, leaving the traditional Christmas slowdown firmly in the rear-view mirror. Buyer confidence has returned quickly, activity levels are rising, and momentum is building across the country.
“This renewed energy is being supported by improving affordability and falling borrowing costs, giving movers greater confidence to proceed with their plans.
“In London in particular, we are seeing a clear uplift in enquiries, viewings and agreed offers, as buyers who delayed decisions last year return to the market. With conditions continuing to improve, 2026 is already shaping up to be a far more active and decisive year for the capital.”
Verona Frankish, CEO of Yopa: “It’s back to business for the UK property market with the seasonal slowdown in house prices seen during December now a distant memory.
“The housing market has wanted no time in finding its stride again and we’re seeing both buyers and sellers engaging with a far greater level of confidence.
“This uplift in market momentum is being driven by improving affordability, with borrowing costs continuing to ease and, as a result, 2026 is already shaping up to be a far busier year for bricks and mortar.”
Marc von Grundherr, director of Benham and Reeves: “The property market has bounced back fighting fit following the festive break, with the reduction in house prices seen during December giving way to positive growth in 2026.
“This suggests that the nation’s homebuyers and sellers have wasted no time in putting their plans into motion, driven by improving affordability and the recent boost of a base rate cut.
“It’s already shaping up to be a far stronger year for the market and one that should see a reduction in selling times, improvements to the prices being achieved and the overall volume of transactions taking place.”
