Nationwide: UK House Price Growth Bounced Back in January
•February 2, 2026
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Why It Matters
The rebound hints at a tentative revival in the UK housing sector, affecting consumer spending, construction activity, and banks’ mortgage portfolios. Improved affordability could reignite buyer confidence, shaping policy and investment decisions.
Key Takeaways
- •Prices up 1% YoY, £270,873 average
- •Mortgage approvals near pre‑pandemic levels
- •Affordability improves; payments 32% of take‑home pay
- •London still least affordable despite gains
- •Rate‑cut expectations drive market optimism
Pulse Analysis
The UK housing market entered 2026 with a modest but notable uptick in price growth, according to Nationwide’s House Price Index. After a year of volatility driven by stamp‑duty changes and budget‑related uncertainty, the 1% annual increase signals that the market may be shedding its defensive posture. This modest rise, while still modest compared with historic booms, is significant because it aligns with a broader stabilization in mortgage approvals, which have hovered near the levels seen before the pandemic shock. Such data points suggest that buyer sentiment is cautiously returning, laying groundwork for a more resilient market cycle.
Affordability dynamics are central to this emerging optimism. Nationwide’s analysis shows that average earnings have outpaced house‑price appreciation, and mortgage rates have trended downward, reducing the cost of borrowing. A typical first‑time buyer now faces mortgage payments equal to roughly 32% of net income, a figure comfortably above the long‑run average but well below the 38% peak observed in 2023. Regional disparities persist, with London remaining the most expensive region despite the largest year‑on‑year affordability gains, while northern areas like Yorkshire and Scotland enjoy payments below historic norms. These nuances shape where demand is likely to concentrate and influence developers’ site selection.
Looking ahead, the trajectory of UK house prices will hinge on monetary policy and fiscal clarity. Market participants are watching the Bank of England for potential interest‑rate cuts, which could further lower borrowing costs and stimulate activity. However, recent stronger‑than‑expected economic data have tempered expectations for multiple cuts this year, introducing a degree of uncertainty. Additionally, the looming mansion tax slated for 2028 and any unexpected budget adjustments could reignite caution. Stakeholders—from lenders to builders—must therefore balance optimism with vigilance, as the interplay of affordability, rate policy, and regulatory signals will dictate the pace of the housing market’s recovery.
Nationwide: UK house price growth bounced back in January
Average house prices started the year on an upward trend, raising hopes of a recovery, Nationwide data suggests
The latest Nationwide House Price Index shows average house prices rose by 1 % annually in January 2026, an improvement on the 0.6 % recorded a month before.
This puts the average UK house price at £270,873, Nationwide said.
Robert Gardner, Nationwide's chief economist, said:
“The start of 2026 saw a slight pick‑up in annual house price growth.
“Housing market activity also dipped at the end of 2025, most likely reflecting uncertainty around potential property tax changes ahead of the Budget.
“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.”
The new year housing market
It’s been a different start to the year compared to 2025.
Homebuyers and sellers entered 2025 with a rush to beat changes to stamp‑duty thresholds.
The final months of 2025 were dominated by uncertainty about Autumn Budget tax rises. The only major change to property taxes in the end was the announcement of a mansion tax, which will be introduced in April 2028.
With the Budget out of the way, there is less uncertainty this year and more optimism as buyers hope for more interest‑rate cuts, which should mean cheaper mortgages.
Research suggests affordability constraints have eased over the past year, attributed to earnings growth outpacing house‑price growth and also a steady decline in mortgage rates. This has helped underpin buyer demand, the building society said.
A prospective first‑time 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, Nationwide found.
All parts of the UK, with the exception of Northern Ireland, saw an improvement in affordability over the past year.
For the second year running, London saw the largest improvement in affordability but remains the least affordable region by a significant margin.
Affordability pressures remain pronounced in the South of England, whilst in the North, Yorkshire & The Humber and Scotland, mortgage payments as a share of take‑home pay are slightly below their long‑run average, Nationwide said.
Will house prices rise in 2026?
House‑price growth slowed towards the end of 2025 as the market adapted to higher stamp‑duty costs and stalled amid Autumn Budget uncertainty.
But there are hopes for more growth in 2026, with more interest‑rate cuts expected in 2026.
Gardner added: “Housing market activity is likely to recover in the coming quarters, especially if the improving affordability trend seen last year is maintained.”
Tom Bill, head of UK residential research at Knight Frank, said:
“House prices edged higher as certainty following the Budget triggered a flurry of deals before Christmas.
“However, mortgage approvals in the same month were 9 % below the five‑year average, showing that demand is still fragile. The chances of two rate cuts this year have faded in recent weeks for reasons that include stronger‑than‑expected UK economic data, which underlines how prices and transaction levels will remain under pressure.
“The absence of political drama over the next few months would help confidence grow, but that might be wishful thinking.”
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