January sees modest market uptick amid easing affordability pressures and steady purchase approvals
UK house prices recorded a slight increase at the start of 2026, according to the latest Nationwide House Price Index.
Average property values reached £270,873 in January, with prices up 0.3% month on month after seasonal adjustment.
On an annual basis, growth picked up to 1%, compared with 0.6% in December.
“Housing market activity also dipped at the end of 2025, most likely reflecting uncertainty around potential property tax changes ahead of the Budget,” said Robert Gardner (pictured right), chief economist at Nationwide.
“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 is maintained.”
Nationwide’s figures suggest that, despite a softer end to 2025, underlying demand has been supported by an improvement in mortgage affordability, underpinned by wage growth and lower borrowing costs. The lender highlighted that reduced affordability pressures are feeding through most clearly at the first-time buyer end of the market, where activity has continued to increase as a share of overall purchases.
Improved affordability supported activity in 2025, Nationwide said, with its latest special report finding that earnings growth has outpaced house price growth over the past year, alongside a steady fall in mortgage rates. This combination has eased the typical payment burden for new buyers.
“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,” Gardner said.
Nationwide reported that affordability conditions have improved across almost all parts of the UK over the past 12 months, with one notable exception.
“All parts of the UK, with the exception of Northern Ireland, saw an improvement in affordability over the past year,” Gardner said. “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.”
The pressures are still most acute in the South of England, while many markets further north now sit close to or below long-run norms for payment ratios.
“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,” Gardner said. “To explore this further, we looked at how the mean earnings for actual first-time buyers compared to the regional average incomes used in our affordability benchmarks.”
Nationwide’s analysis shows a widening gap between average incomes and the earnings of those who are actually managing to enter the market in some parts of the country, particularly in the capital.
“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 said. “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. 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.”
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