British house prices rose sharply in January, recording their largest monthly increase in over a year, according to mortgage lender Halifax, signaling a potential recovery in the housing market following Finance Minister Rachel Reeves’ budget in late November.
Halifax reported a 0.7% month-on-month rise — the biggest since November 2024 — after a 0.5% decline in December. On an annual basis, prices increased 1.0%, up from December’s 0.4% growth, pushing the average property price above £300,000 ($407,000) for the first time.
“While that is undoubtedly a milestone and activity levels suggest a resilient market, affordability remains a challenge for many prospective buyers,” said Amanda Bryden, Halifax’s head of mortgages. She added that the sector is showing signs of improvement, and a further easing of inflation could gradually reduce mortgage costs.
“Wage growth has been outpacing property price inflation since late 2022, steadily improving underlying affordability. That’s a positive trend for buyers and for the long-term health of the market,” Bryden said.
Other lenders also reported growth. Nationwide said annual house prices rose 1.0% in January, with a 0.3% increase month-on-month. The Royal Institution of Chartered Surveyors noted last month that the housing market appeared to be stabilising as uncertainty around Reeves’ budget and tax plans eased.
However, Bank of England data showed mortgage approvals fell in December to their lowest level since June 2024. The central bank held interest rates at 3.75% on Thursday but indicated potential cuts if inflation continues to decline. Markets are largely pricing in two additional quarter-point reductions in 2026.
Halifax forecasts annual house price growth of 1–3% this year. Ashley Webb, UK economist at Capital Economics, expects prices to rise 3.5% by the end of 2026.
Webb warned that political uncertainty, including criticism of Prime Minister Keir Starmer over the fallout from former U.S. envoy Peter Mandelson’s Epstein ties, could dampen growth. “If Starmer or Reeves were replaced by a less fiscally responsible team, rising gilt yields could limit mortgage rate falls, making house price growth softer than expected,” he said.
($1 = £0.7372)