The average UK house price increased by 0.3% month-on-month in January to £270,873, after falling by 0.4% in December, Nationwide has revealed.

The building society’s latest house price index found that house prices increased by 1% annually, following a jump of 0.6% in December.

Nationwide’s chief economist, Robert Gardner, said that the latest figures follow a dip in housing market activity, which likely reflected uncertainty around property tax changes ahead of the Budget.

He added: "Nevertheless, the number of mortgages approved for house purchase remained close to the levels prevailing before the pandemic. Housing market activity is likely to recover in the coming quarters, especially if the improving affordability trend seen last year is maintained.

"Our recent special report highlighted 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."

Nationwide revealed that all parts of the UK, except Northern Ireland, saw an improvement in affordability in the past 12 months, with London recording the largest improvement in affordability.

The society stated that this reflects relatively weak house price growth in 2025, solid earnings growth and lower interest rates. Despite this, the capital remain the least affordable region by a significant margin.

Gardner added: "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.

"These regional variations in affordability have led to some stark differences emerging between those who would like to buy and those that can do so."

Personal finance analyst at Bestinvest, Alice Haine said that while there has been growth in the latest HPI, how far this continues into the year hinges on wider economic pressures.

She concluded: "Chancellor Rachel Reeves’ latest property tax measures, such as a mansion tax and that surprise property income tax hike, may have a dampening effect over the longer term - particularly at the upper end of the market and within the buy-to-let sector. And, while the early-year pickup in demand may be welcome news for sellers looking to progress transactions, higher stock levels in some parts of the country could keep price inflation in check.

"The good news is that mortgage rates eased significantly last year, supported by six interest rate cuts since August 2024 – improving affordability levels. The combination of falling interest rates, moderating inflation – albeit with a few bumps along the way - and stronger real wage growth should help underpin housing market confidence. The quarter-point rate cut delivered in December is unlikely to be repeated at the next rate decision meeting this week, with markets expecting the Bank of England to hold steady while it digests fresh data.

"Consumer sentiment remains subdued, with households likely to exercise caution amid rising unemployment and persistent inflation and borrowing costs that, while easing, remain far above pre-pandemic lows."

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