As the year draws to a close, Halifax’s most recent report on the UK housing market offers a comprehensive picture of current conditions and sets expectations for the coming year. The data reveals that the average UK house price has reached a new record high, capping off a turbulent period for property values. This milestone is especially notable against the backdrop of economic shifts, recent government budget announcements, and speculation about future interest rate changes.

The report highlights that affordability across the UK is at its weakest point in over a decade. Rising house prices have outpaced wage growth, making it increasingly difficult for first-time buyers and those looking to move up the property ladder. Mortgage costs have risen steadily throughout 2025, driven by higher interest rates that have yet to see significant reductions. Even though the Bank of England has signaled a cautious approach, the market has not experienced the rate cuts many hoped would ease borrowing costs. As a result, monthly payments for new mortgages remain elevated, contributing to the affordability crunch faced by many households.

Regional differences in housing market performance have become more pronounced. While London and the South East continue to command the highest average house prices, the pace of growth in these areas has been slower compared to some regions in the North. Cities such as Manchester and Leeds have seen relatively robust price increases, reflecting stronger demand and more dynamic local economies. Conversely, areas in Scotland and Wales have experienced more modest growth, with some pockets even reporting slight declines in average values. These variations emphasize the importance of local factors and economic conditions in shaping housing market outcomes.

Halifax’s analysts note that market stability has been a defining feature of 2025, despite the affordability challenges. House prices have not experienced the volatility seen in previous years, and the number of transactions has remained steady. The recent UK budget, which included measures aimed at supporting homeownership and stimulating the property sector, has provided a degree of reassurance to buyers and sellers alike. However, the effectiveness of these policies will only become clear with time, especially if interest rates remain higher for longer than anticipated.

Looking ahead to 2026, the market faces a period of uncertainty. Halifax projects that house price growth is likely to moderate, with potential for small declines in some regions if affordability continues to worsen. Much will depend on the trajectory of interest rates and the broader economic climate. If inflation remains under control and the Bank of England moves to lower rates, there could be renewed activity among buyers who have been sidelined by high mortgage costs. Nevertheless, many analysts caution that any relief may be gradual, and the market will remain sensitive to shifts in monetary policy and consumer confidence.

Another factor influencing market dynamics is the changing profile of buyers. With affordability stretched, there has been a noticeable increase in longer mortgage terms and a shift toward fixed-rate products, as households seek stability in their monthly payments. This trend is expected to continue into 2026, as buyers look to guard against potential rate increases and budgetary shocks. At the same time, the rental sector is absorbing demand from those unable to purchase, which in turn is putting upward pressure on rents and further complicating the affordability landscape.

Ultimately, Halifax’s report suggests that while the UK housing market remains resilient as 2025 ends, challenges around affordability and borrowing costs will persist into the new year. Regional disparities will likely widen, and the impact of government policies will be closely watched. For buyers, sellers, and policymakers, the market’s stability hinges on economic developments and the path of interest rates. As 2026 approaches, the housing sector is set for a year of cautious optimism, marked by continued adjustment to changing financial realities and the evolving needs of UK households.