Experts weigh in on what is driving buyer confidence this year
Average UK house prices exceeded £300,000 for the first time in January, rising 0.7% month on month and 1.0% annually to reach £300,077, according to the recent Halifax House Price Index.
“The housing market entered 2026 on a steady footing, with average prices rising by 0.7% in January, more than reversing the 0.5% fall seen in December,” said Amanda Bryden, head of mortgages at Halifax. “While that’s undoubtedly a milestone figure, and activity levels show a resilient market, affordability remains a challenge for many would-be buyers.”
Industry observers attributed the market’s momentum to post-Budget clarity and multiple interest rate reductions.
“Post-Budget clarity has given the housing market a boost, with buyers and sellers who put moves on hold resolving to press ahead,” said Jason Tebb, president of OnTheMarket. “Six interest rate reductions in the past 18 months have helped ease affordability and encourage activity.”
Bryden noted that wage growth has outpaced property price inflation since late 2022, improving underlying affordability. She added that more mortgage deals below 4% have emerged, with further gradual reductions expected if inflation continues to ease.
Despite the Bank of England holding rates in February, the narrower-than-expected vote suggested further reductions ahead, according to Tebb. Markets forecast two to three additional base rate reductions in 2026.
Mark Harris, chief executive of mortgage broker SPF Private Clients, reported strong January activity. “With the Budget out of the way and lenders trimming mortgage rates in order to get the year off to a good start, January has been a busy month for enquiries and activity,” Harris said.
Modest growth following pandemic surge
Property prices rose 5.7%, or approximately £16,000, over the past three years, as higher interest rates and stretched affordability kept growth muted. This contrasts sharply with the three years from 2020 to 2023, when prices climbed nearly 19%, or over £44,000, driven by ultra-low borrowing costs and demand for more space during the pandemic.
“For first-time buyers the headline numbers can seem daunting, but it’s important to remember that most are looking at smaller properties in areas that reflect their budget,” Bryden said. “Many locations offer far more accessible price points, especially in northern regions where homes can often be found for under £200,000.”
Tomer Aboody, director of specialist lender MT Finance, noted the market’s stability. “Even through the tough times, the housing market remains remarkably stable, with buyers and sellers continuing to transact, albeit at a slower pace,” Aboody said.
Regional divide deepens
Regional differences in house price performance have become more pronounced, with a clear divide between northern and southern parts of the UK.
Northern Ireland continued to lead the UK, with average prices rising 5.9% annually to £217,206. Scotland followed closely, recording annual growth of 5.4%, taking the average property price to £221,711. Wales saw a modest rise of 0.5% over the year, with the average home now costing £228,415.
Within England, the strongest growth remained concentrated in the north. The North West saw prices increase 2.1% to £244,328, while the North East recorded 1.2% annual growth, bringing the typical price to £181,198.
In contrast, the South East, South West, London, and Eastern England all saw annual declines of more than 1%. As the four most expensive areas of the country, these markets tend to be more sensitive to higher borrowing costs and taxes.
Aboody highlighted these regional variations. “Affordability is still an issue, with cheaper regions seeing the strongest price growth, while the more expensive south of England remains sensitive to higher borrowing costs and taxes,” Aboody said.
“Halifax’s data reinforces what we’re seeing on the ground: prices are broadly stable, with modest growth where supply is tight and homes are priced realistically,” said Amy Reynolds, head of sales at Richmond estate agency Antony Roberts. “This is not a market being driven by speculative price inflation, but by improved confidence and genuine need to move.”
Market activity
HMRC data showed UK home sales decreased slightly in December 2025, with seasonally adjusted residential transactions totalling 100,440, down 0.1% from November. However, year-on-year seasonally adjusted transactions were 4.7% higher than in December 2024.
Bank of England figures showed mortgage approvals decreased 4.8% in December to 61,013, down 8.4% year on year from December 2024.
“There is no question now that the housing market is on the move. Enquiries and sales agreed have increased markedly, and the market is demonstrating resilience,” said Jeremy Leaf, a north London estate agent and former RICS residential chairman.
However, Leaf noted that rising listings, slower interest rate cuts, and economic concerns would likely limit significant price increases, benefiting first-time buyers.
Reynolds observed stronger activity entering spring. “Activity since the start of the year has been noticeably stronger, and as we head into spring, that underlying demand is supporting prices rather than pushing them sharply higher,” he said.
Harris noted that lenders have been innovating to attract buyers. “Mortgage pricing may not be declining dramatically but is becoming increasingly palatable to borrowers, with lenders also tweaking criteria and innovating, particularly with regard to products aimed at first-time buyers,” Harris said.
The Halifax House Price Index has tracked data nationwide since January 1983.
