UK house prices rise less than expected in 2025 as growth slows

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UK house prices rose by 0.6 per cent in 2025 after a slowdown at the end of the year, according to lender Nationwide.

The rise in the average house price for the 12 months to December was less than expectations and down from 1.8 per cent in November, data showed on Friday.

The annual rate was also the lowest since the spring of 2024.

Prices fell 0.4 per cent between November and December to an average of £271,068. Both figures were below analysts’ expectations of a 1.2 per cent annual rise and a 0.1 per cent month-on-month expansion.

Northern Ireland was the best performing area for the third year running, with prices up by an annual rate of 9.7 per cent in the final quarter of 2025.

This was more than five times faster than the 1.7 per cent recorded in the UK as a whole in the quarter and nearly three times higher than the 3.5 per cent recorded in the next strongest region of the North West.

In contrast, house price gains were weaker in southern England, including a 0.7 per cent annual rise in the final quarter of the year for London.

Robert Gardner, Nationwide’s chief economist, said: “Despite the softer end to the year, the word that best describes the housing market in 2025 overall is ‘resilient’.”

He said he expected house prices to increase by 2 to 4 per cent in 2026, predicting a gradual improvement in affordability and a “modest decline in interest rates”.

The Bank of England cut interest rates in December for the sixth time since June 2024, helping to reduce mortgage rates. The two-year quoted mortgage rate with a 60 per cent loan-to-value was 3.91 per cent in November, down from more than 6 per cent in the summer of 2023, according to Bank of England data. Financial markets are pricing another one or two quarter-point interest rate cuts this year.

Together with greater policy certainty after the Budget, that should help sentiment in the property market, argue some experts.

Elliott Jordan-Doak, economist at the consultancy Pantheon Macroeconomics, said: “We remain confident that house price inflation will accelerate over the course of 2026.”

Nationwide reported that flats were a drag on property prices last year, with a 0.9 per cent annual contraction in the fourth quarter. In contrast, prices of semi-detached properties rose by an annual rate of 2.2 per cent in the same period, with terraced only marginally weaker at 1.8 per cent.

This is a continuation of a trend seen in recent years, and is partly a reflection of regional trends where London, which has a much greater proportion of flats, has underperformed the wider UK over the past decade.

Nationwide reports that over the past 10 years, the price of a typical flat has increased by 18 per cent, less than half of the rise in the price of terraced houses, which saw a 41 per cent rise over the same period.