A 0.7% increase in house prices reflects a steady housing market according to the latest index from Halifax, following the 0.5% dip seen in December.
While overall activity levels “show resilience”, the lender says regional differences have become more pronounced, with a clear north-south divide.
Positive momentum has continued in the north of England, where demand and inflation remain robust, according to Halifax. Prices increased by 2.1% in the North West and 1.2% in the North East, to an average of £344,329 and £181,198 respectively.
Wales also saw a modest rise, with a 0.5% annual increase taking the cost of the average home to £228,415. Southern regions, however, all saw annual declines of more than 1%.
“As the four most expensive areas of the country, these markets tend to be more sensitive to higher borrowing costs and taxes, which can weigh on affordability and confidence,” Halifax explained.
According to Amanda Bryden, Halifax head of mortgages, the housing market entered 2026 on a steady footing, with annual growth pushing the cost of a typical UK home above £300,000 for the first time.
“While that’s undoubtedly a milestone figure, and activity levels show a resilient market, affordability remains a challenge for many would-be buyers,” she pointed out.
“Broader economic conditions continue to provide some support. Wage growth has been outpacing property price inflation since late 2022, steadily improving underlying affordability. That’s a positive trend for buyers, and the long-term health of the market.
“And we’re now seeing more mortgage deals below 4%. If inflation continues to ease, there should be further gradual reductions as the year goes on.
“All in all, we still think house prices are likely to edge up between 1% and 3% this year.”
Despite the £300,000 price tag, growth in recent years has been relatively modest following the sharp increases seen during the pandemic, Halifax explained, with higher interest rates and affordability challenges muting growth.
“Affordability is still a challenge, but stronger wage growth and falling mortgage rates have helped relieve some of the pressure in recent years,” Bryden said.
“We expect that improvement to continue in 2026, meaning that with the right support and advice, home ownership should become a realistic prospect for more would-be buyers.”
Iain McKenzie, CEO of The Guild of Property Professionals, said January’s figures show the housing market has started the year on a firm footing.
“While annual growth remains modest at 1.0%, this steady improvement reflects a market that is regaining confidence rather than overheating,” he said.
“The wider backdrop is supportive. Mortgage rates have stabilised at levels below last year and competition among lenders is delivering increasingly attractive deals, particularly for buyers with stronger deposits.
Although inflation’s recent uptick has delayed further base rate cuts, the overall direction for interest rates and wages continues to improve affordability. Crucially, transaction levels remain robust, with activity through 2025 comfortably above pre-pandemic norms, suggesting there is plenty of underlying demand.
“Looking ahead, we expect this momentum to carry through the year, with sales volumes gradually picking up. Price growth is likely to remain measured, however, as higher stock levels give buyers more choice and keep a lid on rapid rises. For both buyers and sellers, 2026 is shaping up to be a more balanced and active market.”
Propertymark CEO Nathan Emerson said it was encouraging to see the housing market gather pace.
“We are witnessing an increased flow of homes being brought to market, alongside growing confidence among buyers and sellers as they approach the moving process,” he added.
“Taking a broader view, lenders are also becoming increasingly competitive, expanding their range of mortgage products and improving access for those planning their next home move.
“Yesterday’s base rate decision, which saw the Bank of England’s Monetary Policy Committee vote to keep rates steady at 3.75%, will provide a sense of reassurance for those considering a house move.
“However, affordability remains a key issue for many. To turn improving market conditions into meaningful access to homeownership, buyers need targeted support, a stable lending environment and policies that directly address affordability pressures across all tenures.”
