UK House Prices Unexpectedly Fall at End of 2025, Affordability Improves Amid Bank of England Rate Cuts
In December 2025, the average UK house price unexpectedly fell 0.4% month-on-month to £271,068, contrary to forecasts predicting a 0.1% rise. Annual house price growth slowed to 0.6% in December, marking the weakest year-on-year increase since April 2024. The year-end softness in the housing market followed a volatile 2025 shaped by stamp duty changes in spring and the timing of the late-year budget.
Despite subdued consumer sentiment, mortgage approvals remained near pre-Covid levels, while mortgage rates persisted at around three times their post-pandemic lows. Notably, affordability metrics showed improvement: the share of first-time buyers rose above the long-run average, the proportion of loans with deposits of 15% or less reached a decade high, and affordability relative to incomes was at its strongest since late 2015.
The Bank of England's decision to cut interest rates in December from 4% to 3.75%, with further reductions anticipated, is being viewed as a turning point for housing activity. Halifax reported that buyers were in the best position to purchase a home in a decade amid these changes.
