"As things stand, mortgage rates are likely to hover between 4% and 5% in 2025, influenced by both global financial markets and domestic monetary policy"
- Amanda Bryden - Halifax
The latest data released by Halifax has revealed that the increasing momentum seen across the property market during 2024 has continued into the new year. According to the figures, prices increased by +0.7% in January to set a new average house price record of £299,138. Halifax says that annual growth eased slightly to +3.0% (vs +3.4% the previous month)
National and regional breakdown
The rate of annual property price inflation slowed in two-thirds of the UK’s nations and regions at the start of the year.
Northern Ireland continues to have the strongest annual property price growth in the UK, though at +5.9% in January, this eased considerably compared to December (+7.3%). Properties in Northern Ireland now cost an average of £205,473.
House prices in Wales were up +3.6% compared to the previous year, with properties now costing an average of £227,397.
Scotland once again saw a lower rise in house prices compared to the rest of the UK, with properties in the country now worth an average of £210,690, +2.4% more than the year before.
In England, the North East has overtaken the North West as the region with the strongest annual property price growth, up +5.2% compared to the previous year, with properties now costing an average of £178,696. This is the first time since September 2023 that the North West has not topped the table of English regions for annual growth.
London retains the highest average house price in the UK, at £548,288, up +2.8% compared to last year.
"The UK housing market started the year on a positive note, with average prices rising by +0.7% in January, more than recovering the slight dip of -0.2% in December," noted Amanda Bryden, Head of Mortgages, Halifax, "This increase pushed the average property price to a new record high of £299,138. However, annual growth slowed to +3.0%, the slowest rate since last July.
"Affordability is still a challenge for many would-be buyers, but the market's resilience is noteworthy. There’s a strong demand for new mortgages and growth in lending. With a stamp duty increase looming, some of this demand may have come from first-time buyers eager to complete transactions before the end of March,"
"Despite geopolitical uncertainties and waning consumer confidence, other key indicators look fairly positive for the housing market. The Bank of England has made its first base rate cut of the year, and there are probably more to come. Household earnings are expected to continue outpacing inflation – albeit that gap may narrow – easing some of the financial pressure still being felt from the cost-of-living squeeze.
She added, "As things stand, mortgage rates are likely to hover between 4% and 5% in 2025, influenced by both global financial markets and domestic monetary policy. Over the past year, buyers have been getting used to this new normal, understanding that rates are unlikely to return to the historical lows of 1%.
"But the fundamental issue in the housing market remains the lack of supply. This long-term trend, coupled with a gradual improvement in affordability, should support further modest house price growth this year."
Industry reaction
Tom Bill, head of UK residential research at Knight Frank, said: “Supply has risen more than demand in 2025, which should keep downward pressure on prices in the short term.
"Underpinned by a stamp duty rise in April, there have been tentative signs of stability in recent weeks, especially among needs-driven buyers in equity-rich markets where the impact of higher mortgage rates has been felt less acutely. How long that lasts depends on the bigger economic picture, including whether the UK gets caught in the crossfire of a trade war between the US and EU, how stubborn inflation proves to be and the impact of the Chancellor’s fast-disappearing financial headroom.”
Nathan Emerson, CEO of Propertymark comments: “As we embed ourselves into 2025, confidence is being echoed within the housing market, as house prices and mortgage lending remain buoyant.
“With the Bank of England announcing that interest rates are tracking downward, mortgage rates and financial pressures are now likely to continue to slowly improve in the imminent future for those looking to make their home move.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, says: “Modest house price growth is being underpinned by borrowing costs which, while softening, remain higher than many borrowers were paying just a few years ago.
“With the Bank of England cutting interest rates this month, and the expectation of further reductions to come, this should encourage borrowers to make their move.
"Swap rates continue on a downward path with some lenders dropping their mortgage rates, in part reversing recent increases. The markets largely expected the latest rate cut and have been factored into pricing already but a continual decline in Swaps would enable lenders to price more keenly, easing borrowers’ affordability concerns."
Amy Reynolds, head of sales at Richmond estate agency Antony Roberts, says: “January was busier than normal, with a lot of market appraisals, which bodes well for a busy spring market.
“Increased activity from first-time buyers has helped, with more sales agreed in chains where someone is keen to take advantage of the stamp duty concession before it ends in March. The benefit to the first-time buyer is instant as it is real cash in their pocket, allowing someone to buy who might not have been able to, and the government perhaps needs to consider further stimulus for the market in its Spring statement.
“While all this suggests growing confidence, it’s too soon to say for certain how the market will unfold."
Iain McKenzie, CEO of The Guild of Property Professionals comments: “The increase of activity towards the end of 2024 spilled over into 2025, with buyers eager to get their transactions over the line before the Stamp Duty changes in April. This has underpinned house prices and kept them edging upwards.
“Amidst conflicting news reports, the latest forecasts from HM Treasury provide a modest improvement for both the economy and the housing market this year. With an improved economic backdrop, the stage is set for steady market activity and moderate price growth throughout 2025.
“While inflation remains above its target, it is significantly better than the high rates seen in 2023 and 2024, and the Bank of England is expected to cautiously continue on its cycle of lowering the base rate throughout the year – as evidenced by the rate cut yesterday, the first of 2025.
“Yesterday’s decision should further improve affordability, widening the buyer pool and sustaining price growth to some degree. However, realistic pricing remains key, as many properties are still selling below the asking price. While market conditions are strengthening, sellers should remain mindful of pricing strategies to secure deals in this evolving landscape.”
