UK house prices bounce back in January as analysts predict 2%-4% rise in 2026

February 2, 2026

TL;DR

UK house prices rose by 0.3% in January, a rebound from a 0.4% fall in December.
Average UK home prices are now 1% higher year-on-year, standing at £270,873.
Nationwide forecasts a 2%-4% price rise in 2026, with Capital Economics predicting 3.5%.
Housing market activity dipped late last year due to budget uncertainty but is expected to recover.
Affordability for first-time buyers is improving, but mortgage payments remain slightly above the long-term average.
Mortgage approvals in December were below the five-year average, indicating fragile demand.
The Bank of England cut interest rates to 3.75% in December, with inflation at 3.2%.
Concerns remain about potential interest rate cuts being limited due to strong pay growth and US rate cuts.
Many fixed mortgage deals are set to expire in 2026, potentially increasing pressure on borrowers.
Households are advised to exercise caution due to unemployment and persistent borrowing costs.

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