In a surprising turn for the UK property market, house prices fell at the close of 2025, contradicting expert predictions of a modest rise. The latest data from Nationwide Building Society reveals a month-on-month decline, capping off a year of unexpected volatility and resilience.
December Dip Defies City Forecasts
According to the influential Nationwide house price index, the average UK property price fell by 0.4% in December to stand at £271,068. This decrease confounded analysts in the City of London, who had broadly forecast a slight increase of 0.1% for the month.
The building society also reported that the annual rate of house price growth slowed significantly to just 0.6% by year's end. This marks the weakest year-on-year reading recorded since April 2024, indicating a notable cooling in the market's momentum as it entered the new year.
A Year of Turbulence and Resilience
Nationwide's chief economist, Robert Gardner, described the year as turbulent but highlighted the underlying strength of the market. He pointed to significant policy shifts that created waves of uncertainty for buyers and sellers alike.
Changes to stamp duty introduced in April injected volatility into the spring and summer markets. This was followed by further disruption in the final quarter, caused by the unusual timing of the Autumn Budget in November. According to financial planner Ian Futcher of Quilter, this late-year fiscal event led many prospective buyers to pause their plans until the policy landscape became clearer, with those delays then extending into the festive period.
Despite these headwinds, Gardner noted the market's core resilience. "Even though consumer sentiment was relatively subdued, with households reluctant to spend and mortgage rates around three times their post-pandemic lows, mortgage approvals remained near pre-Covid levels," he stated.
First-Time Buyers Seize the Initiative
One of the standout trends of the year was the sustained activity from those trying to get onto the property ladder. Nationwide's data shows that the first-time buyer share of house purchases remained above the long-run average.
Notably, the proportion of mortgages advanced with a deposit of 15% or less reached its highest level in a decade. This trend was echoed in a recent report from rival lender Halifax, which suggested that affordability for first-time buyers, when measuring prices against average incomes, was at its strongest since late 2015.
The market now looks towards 2026 with a sense of cautious optimism, underpinned by a shift in monetary policy. In December, the Bank of England cut interest rates from 4% to 3.75%, a move widely anticipated to be the first in a series of reductions designed to stimulate economic activity.
"The Bank of England’s decision to cut rates in December marks an important turning point after a prolonged period of tight monetary policy," said Ian Futcher. "With the budget now behind us and greater clarity on the direction of interest rates, we may finally see at least some of the housing plans that were shelved late last year being dusted off."
While Nationwide acknowledged that house prices ended 2025 on a "softer note", the overall assessment is one of a property market that demonstrated remarkable steadfastness through a year filled with economic and policy challenges.
