Lender forecasts 2–4% house price growth next year
The UK housing market showed notable resilience in 2025, despite subdued consumer confidence and higher borrowing costs, and expects only modest house price growth in 2026.
“The word that best describes the housing market in 2025 is ‘resilient’,” said Robert Gardner, chief economist at Nationwide Building Society.
“Even though consumer sentiment was relatively subdued, with households reluctant to spend and mortgage rates around three times their post pandemic lows, mortgage approvals remained near pre-Covid levels.”
Gardner also noted that stamp duty changes earlier this year prompted a short-term shift in activity. “Stamp duty changes that took effect at the beginning of April created volatility through the spring and summer,” he said.
“Activity spiked in March as purchasers brought forward transactions to avoid paying additional tax, and this led to some softness in the following months. However, the underlying picture was little changed as demand held up well throughout.”
House price growth cooled over the year but remained positive. Gardner said the annual rate of increase slowed from 4.7% at the end of 2024 to 2.1% by mid-2025 and then to 1.8% in November. By the close of 2025, prices were still close to the peak seen in summer 2022.
“With price growth well below the rate of earnings growth and a steady decline in mortgage rates, affordability constraints eased somewhat, helping to underpin buyer demand,” the economist said.
“The first-time buyer share of house purchase activity was above the long run average, supported by easier credit availability, with the share of high loan to value lending (i.e. with a deposit of 15% or less) reaching its highest level for over a decade.”
Regional performance: Northern Ireland leads
Nationwide’s figures showed marked regional divergence, with Northern Ireland significantly outperforming other parts of the UK on price growth in the first three quarters of 2025.
“Annual house price growth in Northern Ireland outpaced the rest of the UK by a wide margin, averaging 11% in the first nine months of the year, almost four times faster than the 3% recorded in the UK as a whole and more than double the 5.1% recorded in the next strongest performing region (the North of England),” Gardner (pictured right) said. “This strong performance mirrored that in the border regions of Ireland over the same period.”
Despite that growth, the data showed that prices in Northern Ireland remain below their pre-global financial crisis peak, in contrast to the UK overall.
Wales broadly tracked the UK average in 2025, while Scotland registered slightly stronger growth.
London continued to lag other regions, with weaker price inflation than any other part of the UK over the first nine months, contributing to a further narrowing in the north-south price gap. “The average price of a home in northern regions of England is now almost 58% of that in the southern regions, well above the lows of around 48% seen in 2017,” Gardner said.
Outlook for 2026
Looking to the year ahead, Nationwide expects a modest pick-up in market activity as affordability improves further, assuming income growth continues to outstrip house price growth and interest rates ease slightly.
“Looking ahead, we expect housing market activity to strengthen a little further as affordability improves gradually (as it has been in recent quarters) via income growth outpacing house price growth and a further modest decline in interest rates,” Gardner said. “We expect annual house price growth to remain broadly in the 2 to 4% range next year.”
The economist said recent property tax announcements are unlikely to drive major changes in market behaviour in the near term, with the planned high value council tax surcharge both delayed and narrowly targeted.
“The high value council tax surcharge is not being introduced until April 2028 and will apply to less than 1% of properties in England and around 3% in London,” Gardner said. “The increase in taxes on income from properties may dampen buy-to-let activity further and hold down the supply of new rental properties coming onto the market, which could in turn maintain some upward pressure on private rental growth.”
For lenders and intermediaries, the outlook points to a market with steady but unspectacular house price growth, ongoing regional variation and a continued focus on affordability metrics, particularly for first-time buyers and higher LTV segments.
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