UK House Prices Dip in December as Market Sets Up for a Cautious 2026

UK house prices ended the year on a softer note, with average values falling by £1,789 in December. The typical UK home now costs £297,755, marking a 0.6% monthly decline and the lowest level since June.

At face value, falling UK house prices may raise concerns, but the broader context matters. Prices were still 0.3% higher than a year ago, showing the market is cooling rather than entering a full downturn.

The slowdown reflects changing conditions rather than weakening demand. Higher borrowing costs earlier in the year and lingering affordability pressures encouraged buyers to pause rather than exit the market altogether.

Despite December’s dip, housing activity through 2025 remained resilient. Transaction levels stayed close to pre-pandemic norms, signalling that demand has become more selective, not absent.

Regional UK house prices continue to tell a very different story. Northern Ireland remains the standout, with prices up 7.5% year-on-year as lower entry points continue to attract strong demand.

Scotland and Wales also posted annual growth, while England showed sharp contrasts. The north-east recorded solid gains, but London continued to lag as affordability constraints weighed on higher-priced markets.

Mortgage rates are now becoming a more supportive factor for UK house prices. The December base rate cut to 3.75% has pushed borrowing costs to their lowest level in almost three years.

Lenders are also expanding higher loan-to-value mortgage options, improving access for first-time buyers. Crucially, the house price-to-income ratio has fallen to its lowest level in over a decade, easing long-term pressure.

For buyers, today’s UK house prices offer a more balanced entry point. Slower price growth, improving affordability, and more realistic sellers are reshaping negotiating power.

For sellers, pricing accuracy has become essential, particularly in premium regions. Homes that are well-presented and realistically valued are still attracting interest in areas with strong local demand.

Looking ahead, the outlook for UK house prices in 2026 is cautiously optimistic. Lower rates and stabilising affordability suggest modest growth rather than sharp declines.

Expectations of 1% to 3% annual growth point to a market finding its footing. December’s decline looks less like a warning sign and more like a necessary reset for sustainable progress.