House price growth cooled sharply at the end of 2025, but transactions held up as falling rates and stronger wages supported demand
UK house price growth lost momentum at the end of 2025 as higher borrowing costs and tax changes weighed on activity, according to the latest Nationwide House Price Index. Annual growth slowed to 0.6% in December from 1.8% in November — the weakest pace since April 2024 — with prices also edging lower month on month after seasonal adjustment.
Despite the softer headline figures, Nationwide said the broader picture remained one of resilience, with transaction levels holding up and clear divergences emerging by region and property type.
Nationwide: resilience despite pressure on households
Robert Gardner, Nationwide’s chief economist, said the market’s overall performance in 2025 was better described as “resilient” than weak.
He noted that, even with consumer confidence subdued, households cautious on spending and mortgage rates still around three times their post-pandemic lows, mortgage approvals stayed close to pre-COVID norms.
Stamp duty changes introduced volatility through the year, with activity pulled forward into March ahead of higher tax bills, followed by a softer period in subsequent months. However, Gardner said underlying demand remained broadly stable.
Affordability improved modestly as house price growth lagged wage growth and mortgage rates drifted lower. That supported first-time buyer demand, with their share of purchase activity rising above the long-run average. High loan-to-value lending — deposits of 15% or less — also reached its highest level in more than a decade.
Regional picture: Northern Ireland outperforms, East Anglia slips
READ MORE: London’s “two‑speed” housing market deepens as brokers report price cool‑off and tougher negotiation
Nationwide’s quarterly regional data for Q4 shows modest annual price growth across most of the UK. East Anglia was the sole exception, with prices down 0.8% year on year — the first regional annual decline since Q2 2024, which also occurred there.
Northern Ireland again led the table, with prices up 9.7% over the year, far outpacing the UK average of 1.7% and the 3.5% increase in the North West, the next-strongest region.
Even after these gains, typical property values in Northern Ireland remain around 5% below their 2007 peak. Across the UK as a whole, prices are now almost 50% higher than they were then. A typical home in Northern Ireland currently costs around 79% of the UK average, compared with roughly 25% above it in 2007.
Scotland broadly tracked the UK trend, with annual growth of 1.9%. Wales stood out alongside Northern Ireland as the only area to record faster growth in 2025 than in 2024, with prices rising 3.2%.
In England, annual growth slowed to 1.2% in Q4 from 1.6% in Q3. Northern regions recorded average growth of 2.3%, led by the North West at 3.5%. Southern England saw average growth of 0.6%, with London recording muted growth of 0.7% over the year and East Anglia the weakest region overall.
Property types: flats continue to lag
By property type, semi-detached homes recorded the strongest gains in 2025, up 2.4% year on year. Detached properties followed at 2.2%, while terraced houses rose 1.8%.
Flats continued to underperform, with prices down 0.9% over the year. Over the past decade, the typical flat has risen just 18% in price, compared with a 41% increase for terraced houses.
Nationwide said this partly reflects London’s relative underperformance, given its high concentration of flats, as well as a lasting shift in buyer preferences toward larger homes since the pandemic. Rising maintenance costs, ground rents and service charges are also likely weighing on demand.
Outlook: modest growth expected in 2026
Looking ahead, Nationwide expects affordability to improve further as income growth continues to outpace house price inflation and interest rates ease. It forecasts annual house price growth of around 2% to 4% in 2026.
Recent and forthcoming tax changes are not expected to materially alter sales activity in the near term. The new high-value council tax surcharge, for example, will not take effect until April 2028 and will affect less than 1% of homes in England.
However, higher taxes on property income could further dampen buy-to-let investment, potentially constraining rental supply and sustaining upward pressure on rents.
Industry view: steady activity, but costs still a barrier
READ MORE: Brokers hail ‘hard‑won’ progress in 2025 – but warn government to stop tinkering
Industry commentators broadly agree the housing market has shown resilience through 2025, while cautioning that transaction costs remain a drag on mobility.
“Activity has been steady as focused buyers and sellers proceed with their transactions,” said Jason Tebb, president of OnTheMarket. “While property values are being held in check partly as affordability challenges remain a concern, particularly in Southern England, some pent‑up demand – which resulted in decisions being put on hold towards the tail end of last year – may now result in a January market which is busier than one would normally expect.
“Encouragingly, the number of first-time buyers picked up over the past year, which is important for the overall health and functioning of the housing market.
“Another base-rate reduction in December eased some of the pressure on borrowers, with lenders ending the year trimming rates. The rock-bottom mortgage rates of the past may be behind us, but buyers have adapted, and with the hope of further cuts to come, they can plan ahead with more confidence.”
For lenders and brokers, the cost of moving remains a structural barrier to mobility.
Tomer Aboody, director of specialist lender MT Finance, described the housing market as “the backbone of the UK economy” and noted that, despite fears the Budget could be “hugely damaging”, activity has remained stable if slower.
“The high cost of moving is still there [...] and putting off many from doing so, choosing to stay put and improve existing homes instead,” he said. “Stamp duty in particular is a barrier to mobility, and with the Chancellor missing an opportunity to reduce or reform it in her Budget, the hope is that further interest rate reductions in the new year will encourage transactions and enable the housing market to function more effectively.”
Early signs of renewed buyer interest
From an agency perspective, there are signs that improved affordability and relief around the Budget outcome may be drawing buyers back into the market as 2026 begins.
Jeremy Leaf, north London estate agent and former RICS residential chairman, said it was “not surprising” that the pace of price growth cooled given “the huge uncertainty surrounding the contents of the Budget” in the final quarter of last year.
“Improvements in affordability, prompted by recent falls in inflation and interest rates, as well as relief the Chancellor’s measures were not as painful as many feared, have helped to stir buyers and sellers from their seasonal hibernation,” he added.
“It is still a little early to determine the quality of the increase in the quantity of post-Christmas enquiries but early signs are encouraging.”
Rate cuts and lender competition set tone for 2026
For the mortgage market specifically, brokers expect further rate competition to be a key theme in the months ahead as lenders chase volume after a stop‑start year.
Mark Harris, chief executive of broker SPF Private Clients, said borrowers would be hoping for “January sales from lenders with lower mortgage rates” – and that early pricing moves were encouraging.
“The trend in new mortgage pricing was downwards in December with the base-rate reduction already priced in to many new deals,” he explained. “Lenders are keen to attract new business and get 2026 off to a strong start.
“Market expectations are for another two or three base rate reductions this year. This will provide a welcome shot in the arm for the housing market which suffered from pre-Budget speculation over property taxes which on the whole turned out not to be as bad as many feared.”
