UK house prices fell to their lowest level in six months in December as uncertainty surrounding the government’s late autumn budget weighed on buyer confidence, despite interest rates beginning to edge lower.
Data from Halifax shows the average UK property price declined by 0.6 per cent month on month in December, a drop of £1,789, taking the typical home value to £297,755. Annual house price growth slowed to just 0.3 per cent, down sharply from 3.2 per cent recorded a year earlier, underlining the gradual loss of momentum seen across 2025.
The slowdown comes after months of speculation over tax changes in the run-up to the budget, which developers and lenders have warned caused buyers to delay decisions and sellers to temper expectations.
Amanda Bryden, head of mortgages at Halifax, said the year ended on a “subdued” note but stressed that overall housing activity had proved more resilient than headlines might suggest.
“While December’s figures reflect a softer close to the year, activity levels across 2025 were broadly in line with the pre-pandemic average,” she said. “A number of factors are now in place that could help stabilise the market as we move into 2026.”
The Bank of England cut interest rates several times last year, with the most recent reduction in December bringing the base rate down to 3.75 per cent. However, those cuts were shallower than many borrowers had hoped, limiting their immediate impact on affordability.
Bryden said signs were emerging that mortgage conditions were beginning to improve. “Mortgage rates are already starting to ease following the latest base rate cut, and we’re seeing a wider range of lending options becoming available, particularly for borrowers with higher loan-to-value ratios,” she said.
Halifax expects house prices to rise modestly in 2026, forecasting growth of between 1 and 3 per cent, although it cautioned that slower wage growth and a flattening jobs market could continue to constrain buying power.
Developers have echoed those concerns. In November, housebuilder Taylor Wimpey warned that demand had softened in the period leading up to the budget as uncertainty over potential tax changes unsettled buyers.
Jennie Daly, the FTSE 100 company’s chief executive, said the “spectre of uncertainty” had weighed on sales activity through the second half of the year. Taylor Wimpey reported its net private sales rate fell to 0.63 between late June and early November, down from 0.71 over the same period in 2024.
With budget clarity now in place and mortgage rates drifting lower, lenders and agents expect market conditions to stabilise in early 2026, although few anticipate a rapid rebound in prices.
