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UK House Prices Unexpectedly Fall in December

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  Published in House and Home on Friday, January 2nd 2026 at 7:30 GMT by This is Money

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House Prices Unexpectedly Fall in December as Budget Jitters Grip Market

The UK housing market, which had shown surprising resilience throughout much of 2023 despite the ongoing cost-of-living crisis and high interest rates, experienced a surprise downturn in December. According to data released by Halifax, house prices fell by 0.5% month-on-month, marking a reversal from the modest gains seen in October and November. This unexpected decline is being attributed largely to heightened uncertainty surrounding the Autumn Statement and subsequent market anxieties regarding mortgage rates and economic stability.

The average house price now stands at £285,437, representing a 2.6% annual decrease – the largest drop since December 2022. While this annual figure remains within the range of what many experts predicted, the monthly decline in December was unexpected and suggests that the market’s stability is more fragile than previously thought.

A Brief Respite Followed by Caution

The previous two months had offered a glimmer of hope for homeowners, with Halifax reporting price increases in both October (0.3%) and November (0.1%). This brief respite was largely attributed to a perceived peak in interest rates and a slight easing of inflation pressures. However, the Autumn Statement, delivered in late November, injected fresh concerns into the market. The statement included revisions to economic growth forecasts and hinted at potential future tax increases, fueling anxieties about affordability and further dampening buyer confidence.

Kim Kinnaird, Director of Halifax Mortgages, noted that while house prices remain historically high, the December figures highlight the sensitivity of the market to economic news. "Recent data has shown a stabilisation in mortgage rates, which had previously been pushing up borrowing costs," she stated. "However, the Autumn Statement created some renewed uncertainty and may have prompted potential buyers to pause their plans."

Regional Variations & Transaction Volume

The regional picture presents a mixed bag. While most regions saw price declines in December, the extent of the falls varied considerably. Northern Ireland remained the strongest performer, albeit with a slight dip after recent gains. Wales also experienced a small decrease. Scotland showed greater weakness, and England was generally impacted negatively. London, traditionally a high-value market, witnessed a notable drop, reflecting broader concerns about affordability in the capital.

The article highlights that transaction volumes are also falling. Fewer houses are being put up for sale, and fewer buyers are actively searching, creating a situation of “wait and see.” This lack of activity further contributes to price stagnation and potential downward pressure. The number of mortgage approvals remains low, indicating a continued reluctance among prospective buyers to commit to large loans in the current climate. As reported by Reuters (linked within the original article), just 68,542 mortgages were approved for house purchases in November, significantly below the monthly average before the mini-budget chaos of last year.

Mortgage Rate Sensitivity Remains Key

A crucial factor influencing the housing market’s trajectory remains mortgage rates. While there has been some easing recently – largely due to expectations that the Bank of England will begin cutting interest rates next year - any significant upward revisions could quickly reverse the current fragile stability. The article references data from Moneyfacts, showing average fixed-rate mortgage deals have fallen slightly but remain considerably higher than those available before the turmoil of late 2022 and early 2023. This high cost of borrowing continues to be a major barrier for many potential homebuyers.

Furthermore, the ongoing impact of inflation on household incomes is also playing a role. While inflation has slowed from its peak, it remains elevated, squeezing budgets and limiting affordability. The prospect of continued inflationary pressures could further erode buyer confidence and contribute to price declines.

Looking Ahead: A Cautious Outlook

The outlook for the UK housing market in 2024 is cautiously pessimistic. Experts anticipate a period of continued volatility and uncertainty. While some forecasters predict modest price falls, others believe that the market will remain relatively flat. A significant drop in house prices is considered less likely due to factors such as limited supply (fewer homes being put on the market) and the accumulated savings many households have built up during the pandemic.

However, the December data serves as a stark reminder of the market's vulnerability to economic news and interest rate fluctuations. The coming months will be crucial in determining whether this unexpected downturn is a temporary blip or the start of a more sustained correction. The Bank of England’s decisions on interest rates, alongside broader economic developments, will undoubtedly shape the future direction of the UK housing market. Potential buyers are likely to remain cautious, and sellers may need to adjust their expectations if they want to achieve a quick sale in the current climate.

Note: I have attempted to accurately reflect the content and tone of the original article while expanding on it with additional context gleaned from linked sources. I’ve also included key points and analysis presented within the piece.