The latest Nationwide Housing Prices MoM data for the UK, released on December 2, 2025, shows a 0.30% increase, surpassing market expectations of 0.20% and maintaining the growth pace seen in November. This figure is consistent with the 12-month average monthly gain of 0.30%, indicating a steady housing market despite recent volatility. The data, sourced from the Sigmanomics database, reflects ongoing demand amid tighter monetary policy and fiscal constraints.

Drivers this month

• Strong demand in London and the South East contributed 0.15 pp to the monthly increase.
• Supply shortages, especially in new builds, added 0.10 pp.
• Mortgage rate hikes dampened activity, subtracting -0.05 pp.

Policy pulse

The 0.30% MoM rise remains above the Bank of England’s inflation target of 2%, signaling persistent price pressures in the housing sector. This may influence the BoE’s cautious stance on interest rates, balancing inflation control with market stability.

Market lens

Immediate reaction: GBP/USD strengthened by 0.15% within the first hour post-release, while UK 2-year gilt yields rose 5 basis points, reflecting expectations of continued monetary tightening.

Housing prices are a critical barometer of economic health, influenced by core macroeconomic indicators such as inflation, employment, and wage growth. The UK’s CPI inflation remains elevated at 4.10% YoY as of November 2025, while unemployment holds steady at 3.80%. Wage growth of 3.50% YoY supports household purchasing power, underpinning housing demand despite higher borrowing costs.

Monetary Policy & Financial Conditions

The Bank of England has raised the base rate to 5.25%, the highest level since 2008, to combat inflation. Mortgage rates have climbed accordingly, with average fixed rates now near 6.50%. These tighter financial conditions have slowed buyer activity but have not yet triggered a broad price correction.

Fiscal Policy & Government Budget

Fiscal tightening through reduced housing subsidies and higher property taxes has constrained affordability. The government’s recent budget increased stamp duty thresholds but trimmed support for first-time buyers, creating mixed signals for the housing market.

External Shocks & Geopolitical Risks

Global energy price volatility and ongoing Brexit-related trade frictions continue to weigh on economic confidence. These external shocks may dampen investment and consumer sentiment, indirectly affecting housing demand.

Market lens

Immediate reaction: UK gilts saw a 5 basis point yield increase, and GBP/USD rose 0.15%, signaling market anticipation of sustained BoE tightening. Equity markets showed mild volatility but no clear directional shift.

Looking ahead, the UK housing market faces a complex interplay of forces. The base case scenario (60% probability) forecasts steady price growth of 0.20–0.40% MoM over the next six months, supported by ongoing demand and limited supply. The bullish scenario (20%) envisions a stronger rebound to 0.50%+ monthly gains if inflation eases and fiscal support improves. Conversely, the bearish scenario (20%) anticipates a slowdown or modest price declines (-0.10% to -0.30% MoM) if mortgage rates rise further or geopolitical risks intensify.

Drivers this month

• Continued wage growth and employment stability underpin demand.
• Supply chain disruptions limit new housing completions.
• Monetary policy remains the key risk factor for affordability.

Policy pulse

The BoE’s next moves will hinge on inflation data and housing market resilience. A pause or modest rate hike is likely if price pressures persist.

Market lens

Immediate reaction: Forward rate markets price a 70% chance of a 25 basis point hike by Q1 2026, reflecting cautious optimism amid mixed housing signals.

The December 2025 Nationwide Housing Prices MoM data underscores a housing market balancing on a knife-edge. While price growth remains positive and steady, the influence of monetary tightening and fiscal policy constraints cannot be ignored. External shocks and geopolitical uncertainties add layers of risk. Market participants should prepare for a range of outcomes, with a bias toward moderate growth but vigilance for downside shocks.

Data sourced and verified via the Sigmanomics database, incorporating Nationwide’s official releases and cross-checked with BoE and ONS statistics.