House prices saw surprise fall in December on Budget nerves

House prices finished 2025 only 0.6 per cent higher than a year ago after suffering an an unexpected slump in December, according to Nationwide Building Society.

In the final month of the year, prices fell by 0.4 per cent taking them to £271,068 on average. 

It means a British home was worth less in the month of December than in the previous eight months. 

In 2025 as a whole, prices edged up by just 0.6 per cent, a mere £1,642 rise.

Prices reached the highest point this year in May at £273,427, almost 1 per cent higher than where they finished the year.

However, some areas of the country still saw their house prices rise by nearly 10 per cent. 

Northern Ireland continues its house price boom with prices up a staggering 9.7 per cent over the course of 2025, and prices in the North West of England and Wales are up 3.2 per cent and 3 per cent respectively. 

Average prices in East Anglia, however, were down 0.8 per cent when comparing the final three months of this year with the last three months of 2024. 

Property experts said the house price slump was due to uncertainrty 

Jeremy Leaf, north London estate agent, said it was partly down to the 'huge uncertainty surrounding the contents of the Budget which prevailed in the final quarter of last year.' 

Sales that completed in December would likely have been agreed in the weeks and months before the Budget, when the market slowed and buyers were able to negotiate big discounts. 

Robert Gardner, chief economist at Nationwide, pointed out that while prices had not risen much this year, this had benefited first-time buyers. 

'With price growth well below the rate of earnings growth and a steady decline in mortgage rates, affordability constraints eased somewhat, helping to underpin buyer demand,' he said. 

'Indeed, the first-time buyer share of house purchase activity was above the long run average.'

House prices rise but flat prices fall 

Semi-detached houses saw the biggest percentage rise in prices during 2025, with average prices up 2.4 per cent year on year.

Detached houses saw similar growth of 2.2 per cent, with terraced only marginally weaker at 1.8 per cent. However, flats saw a year-on-year decline of 0.9 per cent.

Gardner said: 'Over the last ten years, the price of a typical flat has increased by 18 per cent, less than half of the rise in the price of terraced houses, which saw a 41 per cent rise over the same period. 

'This is partly a reflection of regional trends where London, which has a much greater proportion of flats, has underperformed the wider UK over the past decade.

'In addition, the increased costs of maintenance, ground rents and service charges are also likely to have impacted buyer sentiment towards flats in recent years.'

What will happen to house prices in 2026? 

Nationwide has predicted average house prices will grow between 2 per cent and 4 per cent in 2026.

A 4 per cent rise would see more than £10,000 added to the price of the typical home. Meanwhile, the more conservative 2 per cent estimate would see it rise by just over £5,000. 

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Robert Gardner, chief economist at Nationwide said: 'Looking ahead, we expect housing market activity to strengthen a little further as affordability improves gradually via income growth outpacing house price growth and a further modest decline in interest rates.'

Jeremy Leaf added: 'Improvements in affordability, prompted by recent falls in inflation and interest rates, as well as relief the Chancellor’s measures were not as painful as many feared, have helped to stir buyers and sellers from their seasonal hibernation,' said Leaf.

'It is still a little early to determine the quality of the increase in the quantity of post-Christmas enquiries but early signs are encouraging.'

How to find a new mortgage

Borrowers who need a mortgage because their current fixed rate deal is ending, or they are buying a home, should explore their options as soon as possible. 

Buy-to-let landlords should also act as soon as they can. 

Quick mortgage finder links with This is Money's partner L&C

> Compare mortgage rates

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What if I need to remortgage? 

Borrowers should compare rates, speak to a mortgage broker and be prepared to act.

Homeowners can lock in to a new deal six to nine months in advance, often with no obligation to take it.

Most mortgage deals allow fees to be added to the loan and only be charged when it is taken out. This means borrowers can secure a rate without paying expensive arrangement fees.

Keep in mind that by doing this and not clearing the fee on completion, interest will be paid on the fee amount over the entire term of the loan, so this may not be the best option for everyone. 

What if I am buying a home? 

Those with home purchases agreed should also aim to secure rates as soon as possible, so they know exactly what their monthly payments will be. 

Buyers should avoid overstretching and be aware that house prices may fall, as higher mortgage rates limit people's borrowing ability and buying power.

What about buy-to-let landlords?

Buy-to-let landlords with interest-only mortgages will see a greater jump in monthly costs than homeowners on residential mortgages.

This makes remortgaging in plenty of time essential and our partner L&C can help with buy-to-let mortgages too. 

How to compare mortgage costs 

The best way to compare mortgage costs and find the right deal for you is to speak to a broker.

This is Money has a long-standing partnership with fee-free broker L&C, to provide you with fee-free expert mortgage advice.

Interested in seeing today’s best mortgage rates? Use This is Money and L&Cs best mortgage rates calculator to show deals matching your home value, mortgage size, term and fixed rate needs.

If you’re ready to find your next mortgage, why not use L&C’s online Mortgage Finder. It will search 1,000’s of deals from more than 90 different lenders to discover the best deal for you.

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Be aware that rates can change quickly, however, and so if you need a mortgage or want to compare rates, speak to L&C as soon as possible, so they can help you find the right mortgage for you. 

Mortgage service provided by London & Country Mortgages (L&C), which is authorised and regulated by the Financial Conduct Authority (registered number: 143002). The FCA does not regulate most Buy to Let mortgages. Your home or property may be repossessed if you do not keep up repayments on your mortgage