UK house prices edged higher in February as improving affordability and a rebound in first-time buyer activity helped steady a market still grappling with higher borrowing costs and tax uncertainty.

The latest data from Nationwide Building Society shows annual house price growth held at 1.0% in February, unchanged from January.

Prices rose by 0.3% month on month on a seasonally adjusted basis, taking the average UK property value to £273,176.

Robert Gardner, Nationwide’s chief economist, said: “Annual house price growth remained steady at 1.0% in February. Prices increased by 0.3% month on month, after taking account of seasonal effects.

“This reinforces the view of a modest recovery after a dip at the end of 2025, most likely reflecting uncertainty around potential property tax changes ahead of the Budget. Nevertheless, the number of mortgages approved for house purchase remain close to the levels prevailing before the pandemic.”

FIRST-TIME BUYER RETURN

Transaction data points to a more pronounced revival beneath the headline price figures. Total housing market transactions in 2025 were 10% higher than in 2024, signalling renewed momentum after two years of subdued activity.

Crucially, first-time buyers – long squeezed by surging mortgage rates and stretched deposit requirements – are returning. Improved affordability and a modest easing in credit conditions drove an 18% year-on-year rise in mortgage completions among this group.

HOME MOVERS

Transactions involving a mortgage were up 15% compared with a year earlier, reflecting greater confidence among existing homeowners to trade up or relocate.

However the buy-to-let sector remains under pressure. While there has been a gradual increase in mortgaged landlord purchases, activity is still well below historic norms. Higher interest rates have disproportionately weighed on investor returns, while regulatory and tax changes have continued to erode sentiment.

Cash buyers, who dominated the market during the peak of rate volatility, have begun to retreat. They accounted for 35% of transactions in 2025, down from 42% in 2023, as mortgaged demand shows tentative signs of recovery.

Gardner said: “Housing market activity is likely to recover in the coming quarters, especially if the improving affordability trend seen last year is maintained as expected.”

INDUSTRY REACTION

Tomer Aboody, director of specialist lender MT Finance, said: “A period of lower mortgage rates, combined with a lack of patience and eagerness to get deals done after inertia in the run-up to the Budget, should see transaction levels edge higher in coming months.

“The housing market is vital to the UK economy, and even through tough times buyers and sellers have maintained activity, albeit at a lower intensity.

“With the spring forecast imminent, the government must examine current market realities for first-time buyers in particular and work alongside specialist providers to expand access and boost transactions, rather than relying solely on high-street lenders to deliver for all.”

SUBDUED MARKET

Ian Futcher, financial planner at Quilter, said: “House prices appear to be off to a steadier start in 2026. While this suggests a gradual recovery compared to the dip seen towards the end of last year, we are unlikely to see a marked uplift in house prices for a while yet.

“Residential property transactions data out last week show that despite the slight easing of mortgage rates and more competitive offerings being brought to the market by lenders, the market remains very much subdued.

“On a seasonally adjusted basis, residential transactions were down 5% compared to December 2025, and were marginally lower than January 2025. On a non-seasonally adjusted basis, these figures jump to a 24% drop and a 3% fall respectively.

“While lenders are vying for business and bringing cheaper products to the table, as well as higher loan to income and loan to value offerings, affordability is still stretched. With the prospect of further rate cuts throughout 2026, many will be holding out in hopes of securing a cheaper deal later down the line. Until rate cuts are more clearly evidenced and there is significant downward pressure on mortgage rates, prompting more people to put moving plans back in motion, we can expect house prices to remain relatively stagnant.”

STRONG ENQUIRY LEVELS

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Lower mortgage rates continue to support housing market activity.

“Enquiry levels are strong as buyers who put decisions on hold last year now feel ready to proceed, particularly as improved affordability is making them feel more confident about committing to a property purchase.

“Signs of a pick-up in buy-to-let mortgage lending are also welcome, as private landlords are essential to the smooth functioning of the private rented sector.

’The chances of another interest rate cut this month have improved as unemployment rises, inflation falls and economic growth is lacklustre. This will provide a welcome boost as the weather continues to improve and we move into the traditionally busier spring market.”

UNDERLYING RESILIENCE

Daniel Austin, CEO and co-founder at ASK Partners, said: “Today’s modest rise in UK house prices points to underlying resilience, but momentum remains constrained by affordability pressures and a ‘higher for longer’ interest rate backdrop.

“While recent rate cuts signal easing inflation, they are unlikely to transform market conditions overnight. Mortgage pricing has improved, yet buyer and developer confidence remains fragile following a Budget that offered little direct stimulus for housing.”

And he added: “The market is increasingly being shaped by structural rather than cyclical forces. The UK’s forecast 1.4% growth rate, relative outperformance versus the eurozone, and sustained interest from Gulf and Southeast Asian capital continue to support long-term confidence. However, mainstream buyer activity remains subdued, with demand instead flowing into structurally undersupplied rental markets, particularly build-to-rent and co-living in well-connected suburban and commuter locations.

“While proposed planning and affordable housing reforms may improve scheme viability at the margin, elevated construction and financing costs will continue to pressure margins in the near term.

“A clearer downward path for rates towards the 3.5% range would help unlock stalled projects. Until then, capital is favouring resilient, income-led segments such as logistics, data centres, storage and other operational real estate, with real estate debt offering an attractive way to generate secured income while managing downside risk in a still-cautious market.”