UK house prices demonstrated a stable start to 2026, with multiple industry indices reporting modest growth despite geopolitical uncertainties that may impact future interest rate reductions.
According to Rightmove, UK house prices remained flat in February compared to a year ago, marking the strongest start to a year since 2020. The property portal reported that average earnings have increased by 4.7% year-on-year, outpacing the 1.5% cumulative property price growth over the past three years.
Affordability improvements favour buyers
Colleen Babcock, property expert at Rightmove, noted that the number of homes for sale has reached an 11-year high for this time of year, providing buyers with increased choice and negotiating power. Average mortgage rates have fallen to 4.28% for two-year fixed products, down from 4.96% a year ago.
Nationwide reported that house price growth edged higher in January, with all parts of the UK except Northern Ireland seeing improved affordability over the past year. London experienced the largest improvement in affordability for the second consecutive year, though the capital remains the least affordable region.
Halifax data showed average UK house prices rose 0.7% in January, reversing December’s 0.5% decline. Annual growth reached 1.0%, pushing the typical UK home price above £300,000 for the first time. Amanda Bryden, Head of Mortgages at Halifax, noted that wage growth has outpaced property price inflation since late 2022.
Transaction volumes increase
Robert Gardner, Nationwide’s Chief Economist, reported that total housing market transactions in 2025 were 10% higher than in 2024. First-time buyer mortgage completions increased 18% year-on-year, whilst home mover transactions involving mortgages rose 15%.
Zoopla’s Richard Donnell observed that 40% of homes for sale are now cheaper to buy with a mortgage than rent, with average mortgage rates dropping below 4%. The firm reported house price inflation at 1.3%, with higher price rises in northern England and Scotland compared to moderating falls in southern England.
Interest rate concerns
Market analysts had anticipated two interest rate reductions in 2026 based on expectations that inflation would return to the 2% target. However, recent Middle East conflict has triggered increases in oil and gas prices, leading to speculation that interest rates may only fall once this year rather than twice as previously forecast.
Cash transactions in 2025 remained at similar levels to 2024, accounting for 35% of all transactions, down from a peak of 42% in 2023. Buy-to-let purchases involving mortgages showed gradual increases but remain subdued compared to historic levels, reflecting continued regulatory and interest rate pressures on landlords.
RICS reported tentative signs that the market may be turning a corner despite subdued activity levels, though the organisation provided limited specific data in the analysis period covered.
