The start of 2026 saw a slight pick-up in annual house price growth, which rose to 1.0% in January, after slowing to 0.6% in December. 

This is from the Nationwide, which says prices increased by 0.3% month on month in January, after taking account of seasonal effects.

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.

The lender says housing market activity is likely to recover in the coming quarters, especially if the improving affordability trend seen last year is maintained.

It adds that affordability constraints have eased over the past year, thanks to earnings growth outpacing house price growth and also a steady decline in mortgage rates. 

This has helped underpin buyer demand, with first-time buyer activity over the last year continuing to edge higher as a share of house purchases.

The Nationwide’s main affordability benchmark shows that a prospective 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.

This is slightly above the long-run average of 30% and well below the recent high of 38% recorded in 2023.

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, reflecting relatively weak house price growth in 2025, solid earnings growth and lower interest rates. 

Nevertheless, the capital 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.