UK house prices climbed to a new record high in February, defying expectations and reinforcing signs of renewed momentum in the property market despite ongoing affordability pressures.
New data from Halifax shows the average UK property price rose by 0.3 per cent during the month, bringing the typical cost of a home to £301,151, the highest level on record.
The increase follows a return to growth in January and confirms that the market has regained some stability after a volatile period triggered by rising interest rates and economic uncertainty over the past two years.
On an annual basis, house prices increased by 1.3 per cent, exceeding economists’ forecasts of a 0.9 per cent rise. The monthly increase of 0.3 per cent matched expectations but helped push the average property price firmly above the £300,000 mark for the first time.
According to Halifax, the stronger-than-expected performance reflects a combination of easing borrowing costs, improving household incomes and continued constraints on housing supply.
Amanda Bryden said the housing market had entered the year with renewed confidence.
“Affordability remains stretched for many households and housing supply continues to be limited,” she said. “However, falling interest rates and real wage growth have helped to support buyer confidence and activity in the early months of the year.”
The data aligns closely with figures published earlier in the week by Nationwide Building Society, which also reported a 0.3 per cent monthly increase in house prices.
The latest figures suggest the UK housing market is gradually recovering from the shock triggered by the 2022 financial turmoil following the so-called mini-budget introduced by Liz Truss.
That episode caused mortgage rates to spike dramatically and sent house prices falling throughout much of 2023. However, prices are now close to the levels seen before the market disruption.
Analysts say improving wage growth and expectations that borrowing costs will eventually fall further have helped revive activity among buyers.
Ashley Webb said the latest figures confirm the housing recovery has continued into 2026.
“The rise in the Halifax measure of house prices in February chimes with the increase seen in the Nationwide index and provides further evidence that the recent improvement in the housing market has continued,” he said.
“We expect housing activity to strengthen further this year, although there are still risks that could slow the recovery.”
The biggest factor influencing the housing market remains the direction of interest rates set by the Bank of England.
The Bank currently holds its base rate at 3.75 per cent and is widely expected to keep it unchanged at its next meeting. Prior to the recent geopolitical tensions, financial markets had been pricing in a possible rate cut to 3.5 per cent as inflation eased.
Andrew Bailey had previously described a potential rate cut in March as a “genuinely open question”.
However, recent developments in the Middle East have complicated the outlook for monetary policy.
Economists warn that rising oil prices linked to the escalating conflict between the United States, Israel and Iran could push inflation higher again, potentially delaying interest rate cuts.
Higher energy costs often feed into transport prices, manufacturing expenses and household bills, which can keep inflation elevated and force central banks to maintain tighter monetary policy for longer.
Halifax cautioned that if inflationary pressures persist, mortgage rates may fall more slowly than previously expected, which could affect demand in the housing market.
Tom Bill said geopolitical uncertainty could weigh on buyer confidence if it continues.
“Momentum in the housing market had been rebuilding following November’s Budget and the outlook for mortgages appeared brighter only a week ago,” he said.
“However, a prolonged conflict in the Middle East would dampen sentiment and delay rate cuts due to rising inflation, which could place downward pressure on house prices.”
Despite the recent recovery in prices, the UK housing market continues to face structural issues, particularly the long-standing shortage of available homes.
Limited supply has helped support property prices even during periods of weaker demand, preventing sharper declines during the interest rate shock of the past two years.
Property analysts say the combination of constrained supply and steady population growth means prices could remain relatively resilient even if borrowing costs remain higher than expected.
At the same time, affordability remains a major challenge for first-time buyers, particularly in parts of southern England where property prices significantly outpace local incomes.
Looking ahead, most economists expect moderate growth in house prices over the course of 2026 rather than the rapid increases seen during the pandemic-era property boom.
Improving wage growth and stabilising mortgage rates should continue to support buyer demand, while the gradual easing of inflation could eventually allow the Bank of England to cut borrowing costs later in the year.
However, analysts caution that the outlook remains sensitive to global economic developments.
For now, the UK housing market appears to be regaining stability after a turbulent period — but its trajectory in the months ahead will depend heavily on interest rate decisions, inflation trends and broader geopolitical developments.
