UK house prices fell back in December, bringing a subdued close to the housing market in 2025 after a year marked by fragile confidence and higher borrowing costs.
The average price of a home dropped by 0.6% in December, following a 0.1% fall in November, according to Halifax.
That leaves the typical UK property valued at £297,755, the lowest level since June. Annual house price growth slowed to 0.3%, down from 0.6% the previous month.
Despite the late-year softening, performance across the UK remained uneven. Northern Ireland continued to lead the market, with prices rising 7.5% over the past year to an average of £221,062. Scotland recorded annual growth of 3.9%, taking the average price to £217,775, while values in Wales rose 1.6% to £230,233.
STRONGEST GROWTH
In England, the strongest growth was seen in the North East, where prices increased 3.5% year on year to £181,798, followed by the North West with growth of 2.8% to £245,323. London remained the weakest major market, with prices falling 1.3% over the course of 2025 to £539,086.
Amanda Bryden, Head of Mortgages at Halifax, says: “Average house prices fell by -0.6% in December, down £1,789 compared to November, with a typical property now costing £297,755, the lowest since June 2025. On an annual basis, growth slowed to +0.3%, down from +0.6% in November.
“While this may feel like a subdued close to the housing market in 2025, overall activity levels were resilient over the last year and broadly in line with the pre-pandemic average.”
MARKET BOUYANCY
And she added: “Various forces are poised to somewhat buoy the market heading into 2026. While December’s monthly fall in prices was likely related to uncertainty in the latter part of the year, this should now be starting to unwind.
“Further, mortgage rates are already reducing following the latest Base Rate cut and there are an increasing number of lending options available for those borrowing at a higher loan-to-value.
“While affordability pressures persist, the house price to income ratio was at its lowest in over a decade in December, striking a positive note for those looking to purchase their first home.
“On this basis, and recognising the headwinds that may affect buying power – such as the slowing of wage inflation and flattening employment rates – we expect a modest rise in house prices during the year of between 1% and 3%.”
INDUSTRY REACTION
Nathan Emerson, CEO of Propertymark, says: “A modest fall in house prices highlights that affordability pressures are still weighing on the market, despite recent improvements in mortgage rates.
“Overall, there is still a sense of consumer caution lingering within the marketplace, mostly in respect of wider economic considerations, such as the rate of inflation and how this directly impacts affordability for many.
“While price softening may help some buyers, especially first-time buyers, a sustainable recovery will depend on further rate stability, income growth, and addressing the chronic undersupply of homes.”
POLITICAL UNCERTAINTY
Tom Bill, Head of UK Residential Research at Knight Frank, said: “House price growth effectively evaporated last year as supply built and demand was undermined during months of tax speculation before the Budget.
“Now there is more clarity and mortgage rates continue to head lower, we expect stability rather than the feelgood factor in the early months of 2026.
“Despite the growing risk of domestic political uncertainty, we believe house price growth should climb to 3% by the end of the year.”
BUYER DEMAND NEVER DISAPPEARED
Iain McKenzie, CEO of The Guild of Property Professionals, says: “As we move into January 2026, the year is starting on far firmer ground.
“The traditional post-Christmas uplift in activity is already becoming evident and the wider backdrop is far more supportive.
“The Bank of England’s decision to cut the Bank Rate to 3.75%, combined with mortgage rates continuing to edge lower is improving affordability compared with this time last year.
“Importantly, buyer demand never disappeared. Transaction levels held up well through 2025 despite headwinds, with around 1.2 million homes sold, the highest level since 2022.
“Many buyers who paused decisions due to uncertainty are now returning with renewed confidence, supported by rising incomes, more stable borrowing costs, and the widest choice of homes in a decade.
“Overall, the market looks set to remain stable, with modest price growth of around 2.4% forecast over the course of the year.”
RESILIENT MARKET
Jason Tebb, President of OnTheMarket, says: “While affordability concerns and increased stock levels keep property prices in check to an extent, nevertheless the housing market continues to demonstrate considerable resilience.
“Although speculation as to what the Budget might hold created uncertainty with some pausing and putting moving plans on hold, there are signs that buyers and sellers are putting this behind them.
“Falling interest rates have significantly boosted confidence. Six rate cuts in the past 17 months, with more expected this year as inflation appears to have peaked, are easing affordability and giving comfort to those planning a move.
“As lenders tweaked their mortgage rates downwards towards the end of last year and continue to do so at the start of this one, this will provide further impetus and encourage activity.”
CONFIDENCE BOOST
Jeremy Leaf, north London estate agent and a former RICS Residential Chairman, says: “Prices may have slipped a little while some caution remains but since returning after the break we have noticed in our offices how recent falls in interest rates and inflation have started to improve buyer and seller confidence.
“Although historically reliable, these figures do reflect the time leading up to the Budget and Christmas when worries about tax increases meant decision-making was put on hold by many.
“Looking forward we expect prices to slowly rise but to no great heights bearing in mind the amount of choice available and concerns about the economy.”
POST-BUDGET BOUNCE
Amy Reynolds, head of sales at Richmond estate agency Antony Roberts, says: “There are clear signs that the market is on a more positive footing.
“We’ve seen a genuine post-Budget bounce, with improved buyer confidence and several sealed bids in December and already in January – something that was far less common last year.
“This isn’t a market racing ahead, but it does feel smoother and more predictable than 2025. More people want their homes valued, good homes are generating viewings and the very best properties are already achieving stronger prices as competition returns.”
POSITIVE OUTLOOK
Marc von Grundherr, Director of Benham and Reeves, says: “A monthly drop in house prices during December may seem like the proverbial lump of coal but it is simply a case of seasonality and the underlying feeling currently pulsing through the market is one of optimism.
“With the political uncertainty of the Budget having now evaporated and interest rates trending downwards, the nation’s buyers are re-entering the market with renewed vigour, and the outlook for 2026 is a positive one.”
RENEWED MOMENTUM
Verona Frankish, CEO of Yopa, says: “A marginal monthly dip in December is not unusual and largely reflects the seasonal slowdown that comes with the Christmas period, when both buyers and sellers tend to pause their plans.
“Importantly, the backdrop has improved considerably. With Autumn Budget uncertainty now behind us and interest rates falling just before Christmas, buyer confidence has strengthened, and we are already seeing a notable uplift in market activity.
“This renewed momentum should provide support for house prices as we move through 2026.”
COMPETITIVE MARKET
James Nightingall, Founder of HomeFinder AI, says: “December’s house price growth was mostly subdued amid reduced buyer and seller motivation.
“After Christmas, however, buyers started carrying out more online searches whilst sellers chose this period, and particularly Boxing Day, to put their property on the market.
“This uplift in buyer and seller activity has continued into the new year, resulting in a busy and more competitive January market.”
PALATABLE PRICING
Mark Harris, Chief Executive of mortgage broker SPF Private Clients, says: “After a busy start to December, with lots of mortgage rate reductions, there was a lull over the festive period but January has started with a raft of rate cuts led by HSBC, which bodes well for borrowers.
“Leading two-year fixes start from just over 3.5% while their 5-year equivalents start from just over 3.7% and further gradual falls are expected as lenders compete for business.
“With markets expecting one to three further base-rate reductions this year, the rock-bottom rates of the past may be long gone but pricing is becoming increasingly palatable to borrowers, which should boost activity.”
