January Housing Market Thaws
- January Housing Market Thaws, and we have the first "normal" January in a decade.
- The highest number of listed properties for sale per estate agent branch since 2018.
- House prices across England & Wales fell MoM to £286,148, but are still higher by 1.4% YOY.
- The base rate fell to 3.75% in December. I do not expect to see any change to the base rate in February.
- You can get a mortgage for 6 times your annual income.
- Remortgage approvals up by 24% year on year.
The UK economy begins 2026 in what I can only describe as a normal January; well, more normal than any other point this decade. We've had COVID, Truss, Wars, and even with the geopolitical stress, Trump Mania, and the November "overhyped" Budget, the housing market is able to start with some momentum.
Given concerns that inflation will remain significantly above target, the Bank of England has held the base rate at 3.75%. This shouldn't be seen as a concern for the housing market, but rather as prudent, and I expect to see mortgage lenders offering more favourable mortgage products on the back of this.
The housing market has thawed early this year, and I expect to see strong growth throughout Winter into Spring.
House buyer demand has risen since the November budget
Zoopla reported that buyer demand in January 2026 was at a similar level to early 2024, though around 9% below levels early last year when many buyers were seeking to complete transactions before a temporary tax break for purchases expired. They further added that the volume is supported by average mortgage interest rates fixed for five years and a 75% loan-to-value ratio, both at their lowest since 2022.
When you add to this, Zoopla reported the average estate agent has 32 homes for sale, then 2026 is a very exciting prospect for those in the housing market. This number of properties per estate agent branch hasn't been seen in January since 2018.
Source: Richard Donnell, Executive Director at Zoopla
UK house prices hit record high
The Halifax Price Index reports that house prices in the UK increased in January, echoing our report above that January is "normal". and recovered well following last year’s Budget. The average price of a home increased by 0.7 per cent to an all-time high of £300,077, reversing a 0.6 per cent drop in December. The increase follows two months of declines and was the fastest increase since November 2024.
The Halifax Price Index is for their clients and includes a large dataset. The House Price Index from the Land Registry, which includes all property transactions in England and Wales, shows a 2% increase to £ 287,528 in its most recent data for November 2025. Both are showing positive signs of growth; however, they also show how difficult it is to afford property at record-high prices.
Source: Amanda Bryden, head of mortgages at Halifax
Banks offer at least 6 times income mortgages
There is, however, hope for buyers' affordability as eleven mortgage lenders, including four of the six largest in Barclays, HSBC, Nationwide Building Society and NatWest, now allow applicants to borrow at least six times their salary. This is a huge shift away from the red tape that has surrounded the mortgage application process since the 2008 financial crisis. HSBC Premier customers can even get a 6.5 times salary mortgage if they earn £100k or more, or have £100,000 in savings and investments.
The changes are desperately needed, given the rate at which house prices have increased over the last 20 years. In 2024, the price of a typical home in England was 7.7 times the average salary and 5.9 times the average home price in Wales, according to the most recent figures from the Office for National Statistics ONS.
“When the larger lenders start offering higher income multiples, it puts pressure on the remaining lenders which are not offering such large income stretches to do the same. There is no point in going to a lender offering a super cheap rate if it will not offer a sufficiently large mortgage to get the property you want to buy.
All of these income multiple changes really are a game-changer for the mortgage market and those keen to get on the property ladder.”
Source: Aaron Strutt, Mortgage Broker at Trinity Financial
Will mortgage rates go down in 2026?
As we predicted, the base rate was held steady at 3.75% on the 5th of February. I expect a cut to 3.5% this summer, with the potential for a further cut to 3.25% before the end of this year. While the base rate is unlikely to fall to 3% before 2027, mortgage deals may fall to 3% or lower before the end of 2026, if lenders are confident that the base rate will continue to fall.
Fixed Term | Average | Lowest |
2-year | 4.27% | 3.45% |
5-year | 4.38% | 3.67% |
Securing a new deal before your fixed rate expires is key to avoiding the high Standard Variable Rate (SVR), which remains at about 7.25% across all lenders.
As long as inflation remains under control, we will see base rate stability, followed by further, measured decreases. However, if businesses raise prices too quickly this year to cover their higher costs, inflation is likely to rise.
The upcoming MPC announcements on Bank Rates are on the 5th February, 19th March, 30th April, 18th June, 30th July, 17th September, 5th November, and 17th December. I do not expect to see any change to the base rate in March.
Property sales volume is half what it was a decade ago
England & Wales
Sales volume was down 35% year on year, which sounds better than the record fall of -64% in 2008. However, this is compounding several years of broadly falling sales volume. When we look back beyond COVID, sales volume is down by almost half (48%) versus September 2015, despite the country having built almost 1.5 million more homes since then.
Growing confidence since the anti-climactic autumn budget and steadily falling mortgage rates should get the wheels in motion again, as we expect Land Registry data to confirm, once released.
Despite the budget-subdued market and seasonal decline, average house prices have grown 2.1% higher than the previous year and stand just 0.2% below their record high of £288,218 back in August last year (latest HPI data to November 2025).
- The average price for first-time buyers is now £243,333, a 2.9% annual rise.
- Owner-occupiers paid an average of £352,266 (up 2.8% year-on-year).
- Cash buyers averaged £276,266 (up 2.3% year-on-year).
London
London continues to face challenges. The average property price is now £553,258 (November 2025), a 1.2% YoY decrease. House prices in London have been lower than last year for four consecutive months.
Completed property sales in London were just 4,190 in September, a 43% fall from last year and a huge 61% shortfall compared to the decade before.
Is Prime Central London dead?
Last month, we reported that this combination of falling prices and a near-halving of transactions confirms London's high-value market is particularly vulnerable to economic and policy uncertainty. Just last week, Savills reported:
In prime central London, values remain some 24% below their 2014 peak, and we expect them to experience a further modest drop this year. After that, we forecast a gradual improvement, with values increasing by just over 8% over the next five years.
There’s real value to be had, and there’s underlying demand as well. We saw renewed interest from the US last year, and this may well translate into action in 2026.
Source: Andrew Perratt, Head of UK Residential at SavillsWhen we compare 8% growth over 5 years versus inflation of at least 2% per year, you could effectively be making a loss by investing in Prime Central London. Your money will probably serve you better, invested elsewhere.
Meanwhile, the more affordable areas of London are seeing strong price growth, with the Boroughs of Waltham Forest, Barking & Dagenham, and Bexley recording the highest average annual rates of house price growth over the last 10 years (ONS).
For Buy-to-Let investors: Brent, Havering, and Bexley recorded the highest average annual rate of rental growth over the last 10 years (ONS).
Mortgage approval reports
Home buyers
House Purchase Mortgage Approvals in December 2025 fell by 8% on the previous year and show the adverse effect the budget has, so close to Christmas break. I expect to see the January numbers bounce back and beat those from January 2025, as homebuyer confidence is back.
Remortgages
Remortgage Approvals reached 38,353 in December 2025, up 24% on last year and the highest number of approvals since 2021 during COVID. The base rate fall and the volume of available mortgage products are making it easier for homeowners to secure a new mortgage deal. I anticipate the January numbers will show similar annual growth.
How many new-build properties are being built?
Housing completions have fallen year on year for the 4th quarter. There were 36,160 completed new builds in the 2nd quarter of 2025; 19% lower than the previous year. The new build pledge set by the Government would require quarterly completions of 75,000. It'll take more than budget pledges to achieve this target.
Andrew Boast FMAAT
CEO of SAM Conveyancing
It is amazing what can happen in the housing market when it is left alone. No noise from potential budget changes, no threat of rising interest rates. Just new affordable mortgage products that could open up the door to home ownership to a larger first-time buyer audience.
There still needs to be a watchful eye on inflation; however, the signs are good. There are more affordable mortgage options, we have the most properties for sale per estate agent branch since 2018, and the base rate staying put allows lenders to keep their mortgage rates stable. This is going to be a better Winter than 2025!
Sources: Latest data from - Gov.UK, Bank of England, UK House Price Index, ONS and Propertymark (NAEA).
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