Nationwide: Home price growth in the UK recovered in January

Although the growth of house prices slowed in 2025, the real estate market is showing more encouraging signs in the new year

According to nationwide data, average home prices began the year on an upward trend, raising hopes for a recovery.

According to the most recent Nationwide House Price Index, average home prices increased by 1% annually in January 2026, up from 0.6% the previous month.

Following a drop in December, which was attributed to the fallout from the Autumn Budget, average home prices also increased by 0.3 percent per month.

According to Nationwide, this places the average cost of a home in the UK at 270,873.

If affordability increases and interest rates are further reduced, property values may increase even more.

Nationwide's chief economist, Robert Gardner, stated: "Annual growth in home prices picked up a little at the beginning of 2026.

The end of 2025 saw a decline in housing market activity as well, most likely due to a lack of clarity surrounding prospective property tax reforms before the Budget.

Despite this, the quantity of mortgages authorized for home purchases was nearly identical to pre-pandemic levels.

"Housing market activity is expected to rebound in the upcoming quarters, particularly if last year's improving affordability trend continues. The "

The new year's real estate market.

The year has begun differently than it did in 2025.

In an attempt to avoid changes to stamp duty thresholds, buyers and sellers rushed into 2025.

The uncertainty surrounding Autumn Budget tax increases dominated the last few months of 2025. The announcement of a mansion tax, which will go into effect in April 2028, was ultimately the only significant change to property taxes.

Now that the budget has been completed, buyers are hoping for more interest rate reductions, which should result in lower mortgages. This year, there is less uncertainty and more hope.

According to research, over the past year, affordability constraints have lessened due to a steady decline in mortgage rates and earnings growth that has outpaced the growth of home prices. According to the building society, this has supported consumer demand.

According to Nationwide, a prospective first-time buyer with the average UK income who purchases a typical first-time buyer property with a 20 percent deposit would have a monthly mortgage payment equal to 32 percent of their take-home pay, which is marginally higher than the long-run average of 30 percent and significantly lower than the recent high of 38 percent recorded in 2023.

Over the past year, affordability has improved in every region of the UK except Northern Ireland.

London saw the biggest improvement in affordability for the second consecutive year, but it is still the least affordable area by a wide margin.

The South of England continues to face significant affordability challenges, whereas the North does not.

According to Nationwide, mortgage payments as a percentage of take-home pay are marginally below their long-term average in Yorkshire, the Humber, and Scotland.

Will 2026 see a rise in home prices?

As the market adjusted to increased stamp duty costs and stalled due to uncertainty surrounding the Autumn Budget, house price growth slowed towards the end of 2025.

More growth is anticipated in 2026, though, as more interest rate reductions are anticipated in that year.

Additionally, Gardner stated: "If the upward trend in affordability observed last year continues, housing market activity is probably going to rebound in the upcoming quarters. The "

"House prices edged higher as certainty following the Budget triggered a flurry of deals before Christmas," stated Tom Bill, head of Knight Frank's UK residential research division.

Yet, mortgage approvals during the same month fell 9% short of the five-year average, indicating that demand remains vulnerable. Stronger-than-expected UK economic data, which highlights how prices and transaction levels will continue to be under pressure, is one reason why the likelihood of two rate cuts this year has decreased in recent weeks.

"It may be wishful thinking, but the lack of political drama over the coming months would boost confidence.

Go to the Nationwide Building Society website.