UK House Prices Increase in February Amid Stable Market Sentiment
House prices in the UK rose in February as the chancellor avoided the negative speculation that had previously depressed the market ahead of the budget. This comes as Rachel Reeves prepares to present the spring forecast on Tuesday.
The average price of a home increased to £273,176 last month, marking a 0.3% rise from January, according to Nationwide, the country’s largest building society. This monthly increase matched January’s growth and exceeded analysts’ expectations of a 0.2% gain. The annual growth rate remained steady at 1%.
Unlike the months leading up to last November’s budget, the chancellor’s upcoming forecast has not triggered a slowdown in the housing market.
Jason Tebb, president of the property website OnTheMarket, said:
“Housing market activity and sentiment have continued to pick up this year, with buyers and sellers proceeding with their moves with more clarity and confidence, particularly as the spring forecast has not attracted anything like the same level of negative speculation as November’s budget.”
Market Outlook and Economic Context
Following a turbulent 18 months, the chancellor is expected to highlight progress on reducing the cost of living and assert that Labour has the “right plan” for fixing the economy during a brief statement to parliament on Tuesday, coinciding with the latest forecasts from the independent Office for Budget Responsibility.
Robert Gardner, Nationwide’s chief economist, noted that the recent house price figures indicate a “modest recovery after a dip at the end of 2025,” which was influenced by uncertainty surrounding potential property tax changes ahead of the budget.
Gardner added:
“Housing market activity is likely to recover in the coming quarters, especially if the improving affordability trend seen last year is maintained as expected.”
Transactions in the housing market increased by 10% last year compared to 2024. Gardner attributed this to improved affordability and an easing in mortgage availability, which has supported first-time buyer activity.
Inflation and Interest Rate Developments
UK inflation was anticipated to ease to the Bank of England’s 2% target by April, which would have allowed for another interest rate cut amid rising unemployment, sluggish economic growth, and slowing wage increases.
However, the likelihood of a rate cut in March declined to 71.4% on Monday morning from 80% the previous week. This shift followed US-Israeli airstrikes on Gaza, which heightened concerns about oil supply disruptions. Brent crude, the global benchmark, surged as much as 13% in early trading, reaching $82 per barrel.
Alice Haine, a personal finance analyst at Bestinvest, commented:
“Higher energy prices would make it harder for the Bank to bring inflation down to target. Many borrowers on one of the 1.8 million fixed-rate mortgages expiring this year are rolling off ultra-low five-year fixed-rate deals into a much higher mortgage rate environment.”
She continued:
“They face refinancing at much higher rates than their current deal, which will put pressure on disposable incomes, though they can take comfort that they have avoided the worst of the mortgage crisis.”
