UK house prices returned to growth at the start of the year, rising faster than expected as uncertainty linked to last year’s budget began to ease, according to new data from Nationwide.

Average property prices were 1.0% higher in January than a year earlier, marking the strongest annual increase since November and beating economists’ forecasts of a 0.7% rise. The figure follows a modest slowdown at the end of last year, when buyer confidence dipped amid concerns over potential tax changes announced by Chancellor Rachel Reeves.

On a monthly basis, prices edged up 0.3% in January, reversing a 0.4% fall in December and broadly matching market expectations.

Nationwide’s Chief Economist Robert Gardner said the late-year weakness likely reflected hesitation from buyers and sellers ahead of the government’s budget, rather than any fundamental deterioration in the housing market.

He added that housing market activity is expected to improve over the coming months, particularly if affordability continues to strengthen as it did last year.

Nationwide noted that conditions for first-time buyers appear to have improved, with demand holding up and mortgage approvals remaining close to pre-pandemic levels. Lower borrowing costs over the past year have helped offset still-high house prices, supporting buyer confidence.

However, other indicators paint a more mixed picture. Data released last week by the Bank of England showed mortgage approvals fell sharply in December, hitting their lowest level since June 2024. The central bank is widely expected to keep interest rates unchanged at 3.75% at its next policy meeting.

While the January data suggests renewed momentum, economists caution that the housing market’s recovery remains fragile and closely tied to interest rate decisions and wider economic confidence in the months ahead.