In the second month of 2026, UK house prices can be described as remarkably stable.
The average asking price for newly listed homes across the UK currently stands at £368,019, only £12 lower than in January, representing a negligible monthly change of -0.0% and remaining flat year-on-year. As the spring homebuying season approaches, mortgage rates remain near a three-year low, while wage growth continues to outpace house price increases, creating a favorable entry window for buyers.
Today, lansha reviews the key drivers behind the housing market’s recovery dynamics in February.
Price stability reflects rational supply-demand balancing after January’s surge.
The housing market at the start of 2026 shows a clear pattern: a strong surge in January followed by stability in February. This shift does not indicate weakening market sentiment, but rather a natural adjustment after confidence rebounded following the national budget announcement.
January’s sharp rise was largely driven by the release of pent-up demand from both buyers and sellers after uncertainty surrounding the Autumn Budget faded. This led to house prices reaching record levels for the same period.
February’s stability, however, reflects a market balancing under fundamental conditions. Housing inventory in the UK is currently at its highest level for this time of year in 11 years, significantly intensifying competition among sellers. With buyers increasingly sensitive to price changes, further price increases lack strong support. As a result, most sellers prefer to maintain January’s gains rather than push prices higher aggressively, leading to a stabilization of prices.
Across different buyer segments, structural differences in the market have become increasingly clear. First-time buyers and home movers remain the main pillars of demand.
Excluding Inner London, the average price of homes targeted at home movers rose 0.7% month-on-month and 0.8% year-on-year, making it the only segment among the three major categories to achieve both monthly and annual growth.
Homes typically purchased by first-time buyers saw a modest 0.2% monthly increase but a slight 0.4% annual decline, remaining broadly stable overall.
Meanwhile, the high-end segment recorded a marginal 0.2% decline both month-on-month and year-on-year. This softer performance reflects the fact that high-net-worth buyers are more sensitive to borrowing costs and property taxes. Combined with ample housing supply, negotiating power in this segment has increasingly shifted toward buyers.
Market activity shows gradual recovery.
Market activity in February 2026 was partly affected by the high comparison base created by the stamp duty policy window in 2025. As a result, new listings were down 1% year-on-year, while completed transactions were 5% lower.
However, compared with February 2024, listings were 11% higher and transactions increased by 9%, indicating that market activity is gradually returning to normal levels. Greater policy certainty following the budget announcement is steadily improving both buyer and seller confidence.
Buyers are now clearly in a dominant position in the market, holding stronger negotiating power.
Two major factors underpin this trend. First, housing supply is at an 11-year seasonal high, giving buyers significantly more choice and reducing the need to compete aggressively for properties. Instead, they have more opportunities to select better-value homes and negotiate prices.
Second, wage growth remains strong. Average earnings in the UK have risen by 4.7% year-on-year, significantly outpacing current house price growth and comfortably exceeding the cumulative 1.5% house price increase over the past three years. Over the same three-year period, wages have risen by around 17%, substantially improving real purchasing power and easing savings pressure for buyers.
Mortgage rates remain low, supporting market recovery.
Favorable mortgage conditions remain a key pillar supporting the UK housing market’s recovery. According to Rightmove data, the average two-year fixed mortgage rate in February stood at 4.25%. Although it has fluctuated slightly recently, it remains near the lowest level since the mini-budget in September 2022 and significantly below the 4.96% level recorded a year earlier.
This reduction means a typical buyer could save around £100 per month on mortgage payments, easing repayment pressure.
More importantly, lending policy adjustments have lowered entry barriers for buyers. In 2025, the Bank of England and financial regulators relaxed loan-to-income limits and stress-testing rules, giving lenders greater flexibility.
Many lenders have since introduced new mortgage products, including options with low or even zero deposits for qualified buyers. Some products also allow borrowing up to six times annual income. These changes are particularly supportive for first-time buyers and home movers, enabling previously constrained demand to re-enter the market and contribute to the recovery.
Regional performance.
Regional divergence remained evident in February, with different areas benefiting from their own structural advantages.
London recorded a modest monthly increase of 0.2%, with the average price reaching approximately £680,000. While the overall market remained stable, performance varied widely between boroughs.
Westminster, Hackney, and Ealing saw monthly price increases of 3.9%, 3.0%, and 2.9% respectively, reflecting a modest recovery in demand for high-quality homes in prime areas.
By contrast, Tower Hamlets and Havering recorded declines of more than 2.9%, as higher inventory levels and greater cost sensitivity among buyers in outer areas led to mild price adjustments.
In the North West of England, where Manchester is located, prices rose 0.3% month-on-month and 0.4% year-on-year.
As the economic hub of Northern England, Manchester continues to benefit from stable demand from first-time buyers and home movers. Strong employment opportunities and population inflows support housing demand, while relatively rational pricing by sellers has kept transaction activity stronger than in some southern regions.
In the West Midlands, where Birmingham is located, prices increased by 0.6% month-on-month and 1.3% year-on-year, making it one of the stronger-performing regions in central England.
As a key transportation and economic hub, Birmingham continues to attract job growth and population inflows. Combined with upgrading demand from local residents, these factors are supporting steady price growth. Compared with London, Birmingham’s lower price base and stronger affordability make it less sensitive to borrowing costs, allowing demand to recover more smoothly.
Spring market outlook.
As the spring buying season approaches, the current market environment presents a rare entry window for buyers. The Bank of England’s interest rate decision on the 19th of this month will be a key factor shaping market expectations.
According to a recent Reuters survey, more than 60% of economists expect the Bank of England to cut the base rate by 25 basis points at the meeting, reducing it from 3.75% to 3.50%. Rates may fall further to around 3.25% by the end of the year, gradually moving toward the neutral range of 3.0% to 3.5%.
Although inflation remains above the 2% target, recent voting patterns within the Monetary Policy Committee suggest a more dovish stance. If rate cuts materialize, mortgage costs could decline further, strengthening the housing market’s recovery momentum.
Even if rates remain unchanged in the short term, the current average two-year mortgage rate of around 4.28% is still near a three-year low and continues to support buyer affordability.
lansha Summary
Overall, the UK housing market at the start of 2026 has entered a rational and steady recovery phase. Improving confidence, stronger affordability, and supportive lending conditions form the three main pillars underpinning the market.
Although regional divergence will likely persist, major cities continue to demonstrate resilience thanks to their economic fundamentals and underlying demand. With the spring season approaching, if sellers maintain realistic pricing, the market may achieve more balanced and sustainable growth supported by genuine demand and potential interest-rate adjustments.
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