UK House Prices Rebound with 1% Growth in January 2026
Average residential property values in the United Kingdom kicked off the year with positive momentum, sparking optimism for a broader market rebound, according to data released by Nationwide.
The most recent edition of the Nationwide House Price Index indicates that the typical house price across the UK increased by 1% on an annual basis during January 2026. This marks a noticeable uptick from the 0.6% growth observed in the preceding month.
As a result, Nationwide reports that the national average house price now stands at £270,873.
Insights from Nationwide’s Chief Economist
Robert Gardner, the chief economist at Nationwide, commented on the development by stating, “We witnessed a modest acceleration in annual house price appreciation at the beginning of 2026.”
He further noted, “Activity in the housing sector experienced a temporary slowdown toward the close of 2025, probably due to apprehensions surrounding possible alterations to property taxation in anticipation of the Budget.”
Despite this, Gardner highlighted that “the volume of mortgages approved for home purchases held steady, remaining near the pre-pandemic benchmarks.”
Looking ahead, he expressed confidence, adding, “We anticipate a resurgence in housing market activity over the upcoming quarters, particularly if the positive affordability dynamics from the previous year persist.”
The Housing Market’s New Year Dynamics
The opening of 2026 presents a stark contrast to the previous year. In early 2025, there was a surge of activity as homebuyers and sellers hurried to complete transactions ahead of anticipated adjustments to stamp duty thresholds.
The latter part of 2025 was overshadowed by speculation regarding potential tax hikes announced in the Autumn Budget. Ultimately, the primary adjustment affecting properties was the introduction of a mansion tax, set to take effect in April 2028.
Now that the Budget uncertainties have been resolved, the market is entering 2026 with greater clarity and renewed enthusiasm. Buyers are optimistic about additional reductions in interest rates, which could translate into more affordable mortgage options.
Studies indicate that affordability challenges have diminished over the last 12 months. This improvement stems from wage increases surpassing house price rises, combined with a consistent drop in mortgage interest rates. These factors have bolstered demand from potential purchasers, as outlined by the building society.
For a typical first-time buyer earning the national average salary and purchasing a standard entry-level property with a 20% down payment, the monthly mortgage repayment would represent about 32% of their net income. This figure is marginally higher than the historical norm of 30% but substantially lower than the peak of 38% seen in 2023, according to Nationwide’s analysis.
Affordability enhancements were recorded across every UK region except Northern Ireland over the past year.
For the second consecutive year, London registered the most significant gains in affordability, though it continues to rank as the country’s least affordable area by a wide margin.
In the southern regions of England, affordability strains persist at elevated levels. In contrast, areas in the North, Yorkshire and the Humber, and Scotland now experience mortgage costs that fall slightly below their long-term averages, Nationwide reported.
Prospects for House Price Increases in 2026
Toward the end of 2025, the pace of house price growth decelerated as the market adjusted to elevated stamp duty expenses and paused amid lingering Budget-related uncertainties.
Nevertheless, expectations are building for renewed price appreciation throughout 2026, fueled by forecasts of further interest rate reductions during the year.
Echoing his earlier sentiments, Gardner reiterated, “We expect housing market activity to strengthen in the quarters ahead, provided the favorable affordability trajectory from last year continues.”
Tom Bill, who leads UK residential research at Knight Frank, offered additional perspective: “Property values saw a slight increase as post-Budget clarity prompted a wave of transactions leading up to the holiday season.”
He cautioned, however, that “mortgage approvals for that period were 9% below the five-year average, underscoring the ongoing fragility in buyer demand. Prospects for dual rate cuts this year have diminished lately, influenced by robust UK economic indicators, which suggests that both prices and transaction volumes will face continued headwinds.”
Bill concluded by noting, “A period without political turbulence in the near term could foster greater confidence, though such stability might prove overly hopeful.”
