The UK housing market remained resilient through 2025 despite subdued consumer confidence and elevated mortgage rates, according to a new review and outlook published by Nationwide.
Mortgage approvals held close to pre-pandemic levels last year, even as borrowing costs stayed around three times higher than their post-Covid lows. Nationwide said this resilience reflected a gradual easing in affordability pressures, driven by wage growth outpacing house price inflation and a steady decline in mortgage rates.
Annual house price growth slowed through the year, easing from 4.7% at the end of 2024 to 2.1% by mid-2025, before falling further to 1.8% in November. Even so, average prices remained close to the record highs seen in summer 2022.
Stamp duty changes trigger short-term swings in buyer activity
Stamp duty changes introduced in April led to fluctuations in market activity through the spring and summer, Nationwide said. Transaction volumes spiked in March as buyers brought forward purchases to avoid higher taxes, followed by softer conditions in subsequent months.
However, Nationwide stressed that the underlying level of demand remained broadly stable throughout the year.
Robert Gardner, Nationwide’s Chief Economist, described “resilient” as the defining feature of the housing market in 2025, pointing to steady buyer interest despite economic headwinds.
Easing affordability lifts first-time buyer participation
Improving affordability played a key role in supporting demand. Nationwide noted that house price growth remained well below earnings growth for much of the year, while mortgage rates edged lower.
The share of first-time buyers rose above its long-term average, supported by easier access to credit. Lending at higher loan-to-value ratios, defined as deposits of 15% or less, reached its highest level in more than a decade.
Northern Ireland leads UK house price growth as London lags
Regional performance diverged sharply in 2025. Northern Ireland recorded the strongest house price growth, averaging around 11% in the first nine months of the year, nearly four times the UK-wide average.
Wales broadly matched national trends, while Scotland posted slightly stronger growth. London was the weakest performing region, with annual growth averaging 1.3%, continuing a broader shift in momentum towards northern regions of England.
Nationwide expects 2-4% house price growth in 2026
Looking ahead, Nationwide expects housing market activity to strengthen modestly in 2026 as affordability continues to improve. The lender forecasts annual house price growth in the range of 2-4%, supported by income growth outpacing house price inflation and a further gradual easing in interest rates.
The lender said recent Budget measures are unlikely to have a significant near-term impact on the market. However, higher taxes on rental income could dampen buy-to-let investment and limit the supply of new rental homes, potentially sustaining upward pressure on rents.
The findings are drawn from Nationwide’s House Price Review and Outlook for 2026.
