The UK housing market has entered 2026 in better shape than many expected (me, included) late last year. After a long period dominated by interest rate anxiety and stretched affordability, the early January data points to a market stabilising rather than surging. Asking prices are up, mortgage conditions have improved modestly, and the rental sector remains firm. Taken together, this suggests a market that is recalibrating rather than overheating.

Asking prices in January show an uplift

January has delivered the largest New Year rise in new seller asking prices on record. Average asking prices rose by just under three per cent in a single month. In cash terms, that is close to ten thousand pounds added to the typical listing price, pushing averages into roughly the mid three hundred and sixty thousand to three hundred and seventy thousand range.

While the headline figure looks striking, context matters. On an annual basis, asking prices are only slightly higher than they were a year ago. That points to a market that has avoided a sharp correction rather than one entering a fresh boom. After a flat and often uncomfortable 2025, sellers appear more willing to test higher prices, but only within limits that buyers are prepared to accept.

This looks less like exuberance and more like confidence returning cautiously, supported by marginally better affordability rather than speculative optimism.

Market activity and buyer behaviour

Beneath the price data, market activity has picked up noticeably. Buyer demand in early January rose sharply compared with the quiet period before Christmas, with agents and portals reporting increases of more than 50% in searches and enquiries. New listings are also higher, improving choice for buyers and lifting stock levels in many areas.

Feedback from agents suggests confidence is returning, but it remains conditional. Buyers are still price sensitive and quick to disengage from properties that feel over ambitious. Where sellers are realistic and responsive to local comparables, improved demand and easing mortgage costs are translating into stronger viewing numbers and quicker agreements. Where pricing runs ahead of fundamentals, activity drops away quickly.

The balance of power has shifted slightly back towards sellers, but it remains far from one-sided.

Mortgage rates are easing, but affordability still matters

Mortgage pricing remains one of the key drivers of sentiment. After the sharp increases of recent years, fixed-rate deals have continued to drift down. Many mainstream lenders are now offering two-year fixed products in the mid four percent range for borrowers with solid deposits, with some headline rates below four percent at lower loan-to-value levels.

The base rate remains high by recent historical standards, but markets are increasingly focused on the possibility of further cuts later in the year. Even without significant central bank moves, competition between lenders has already improved monthly repayment calculations for many borrowers.

For first-time buyers and movers who were priced out during the peak of the rate rises, 2026 is starting to look more workable. That said, borrowing remains far from cheap and affordability constraints have not disappeared.

Rental market remains resilient

While sales activity attracts most attention, the rental market continues to show strength. Official data confirms that private rents are still rising faster than general inflation, supported by tight supply, demographic pressures and several years of landlord exits driven by tax and regulatory changes.

From an investment perspective, this environment has produced some of the most attractive gross yields seen in years across many regions. Softer purchase prices in certain areas, combined with higher achievable rents, have improved the numbers for new purchases and remortgages, particularly outside the most stretched parts of southern England.

That said, yields alone do not tell the full story. Rising costs, regulatory uncertainty and tenant affordability limits remain significant constraints. Strong rental demand does not automatically translate into lower risk or easier management.

Regional differences remain important

National averages continue to mask wide regional variation. London has edged back into modest positive territory, with asking prices rising on the month and annual growth returning after a volatile period. More affordable regions, including parts of the North East and North West, are recording stronger annual gains, supported by relative affordability and steady local demand.

For buyers, conditions are improving but uneven. Those with deposits and stable incomes are benefiting from increased choice and slightly better mortgage pricing, even if prices have not fallen in the way some anticipated. Sellers who price sensibly are seeing renewed New Year momentum and a deeper pool of committed buyers. Landlords continue to operate in a market where rents are strong, and yields are attractive in many areas, but they face ongoing regulatory and financing considerations.

A market finding its balance

Overall, the opening month of 2026 points to a housing market that is neither surging nor sliding. Prices are edging higher, mortgage rates have eased from their peaks, and rents remain elevated. The key question for the months ahead is whether the January uplift proves to be a seasonal bounce or the early stage of a more stable period of growth.

For now, the data suggests a market adjusting to new realities rather than reverting to old excesses.