House prices fell by -0.4% in December, according to Nationwide. This left annual growth for 2025 at 0.6% - slightly lower than our forecast of 1.0%. Growth was stronger in the north, with the North West the top performing region with annual growth of 3.5%. East Anglia was the only region to see an annual fall at -0.8%. London values rose 0.7% over the year, outperforming the South East (0.1%) and South West (0.5%). London still lags behind the rest of the south on a 5-year basis however. We expect a similar regional trend to continue through 2026, with more price growth in more affordable markets.

Activity levels remain robust, supported by high numbers of First Time Buyers (FTBs). There were 384,000 FTB mortgage completions over the 12 months to September 2025, the highest level since the Global Financial Crisis (excluding a brief post-Covid spike). Total mortgage approvals fell marginally by -1% to 64,500 in November 2025, but both approvals and sales agreed remained in line with the 2017-19 average.

The depth of demand is shallow however, with most surveyors reporting falling levels of both buyer enquiries and instructions to sell. The robust sales figures suggest that there is a smaller but committed set of buyers driving the sales market. Sales are proceeding, but there is little upward pressure on prices. 

Mortgage affordability continues to improve, which should further support market activity. Lenders have priced in a further cut which is expected in spring 2026, with some lenders offering rates closer to 3.5% for lower LTV products. In December 2025, the Bank of England made a further 25bps cut to the base rate to reduce it to 3.75%, in response to lower than expected CPI of 3.2% in November 2025. Average annual wage growth, a key driver of inflation, has continued to slow, making the prospect of further base rate cuts more likely later on in 2026.

A weaker economic outlook is likely to weigh on the market into 2026. GDP fell by -0.1% for the 3-months to October 2025, while UK unemployment continued to rise to 5.1% over the same period – up from 4.3% for the 3-months to October 2024. Oxford Economics forecasts rising unemployment and lower levels of GDP growth to continue throughout 2026, which is likely to subdue demand in the market and hold back house price growth.

More localised house price data from September shows that the North West and Scotland had the greatest value growth, particularly the Ribble Valley (8.5%) and Clackmannanshire (7.3%). Ceredigion saw the most significant price falls of -10.0%, followed by Brent (-4.8%) and Rother in Sussex (-4.7%).