"While further cuts to Bank Rate are still on the cards, the pace looks likely to be more gradual"
In its UK Housing Market Review and Outlook for 2025, released today, Halifax revealed that property prices hit a record high of £298,083 following annual growth of +4.8%, with
transaction volumes returning to pre-pandemic levels.
Despite improving, affordability continues to be an issue for many buyers - the lender is predicting interest rates will come down slowly, affecting those looking to refinance in 2025, although it also predicts that transaction numbers will increase slightly next year and that house prices will grow modestly by up to 3%.
However, the lender cautioned that, as with recent years, the economic environment makes forecasting 2025's property market uncertain.
Amanda Bryden, head of Halifax Mortgages, said:
“2024 was a year when UK property prices once again defied expectations, rising by +4.8% on an annual basis, to now sit at a record high of £298,083. The market remained largely flat until the summer, with most of that growth concentrated in the second half of the year.
“Two key factors have driven the recovery in the housing market over the last 12 months. The first is lower mortgage rates, at times up to 160 basis points below the peaks of 2022 and 2023.
“Second is that income growth continues to catch up with the consumer price increases of the past few years. For new mortgages, monthly costs as a percentage of earnings fell from 33% to 29% over the last year. This easing financial pressure has boosted buyer confidence as demand for mortgages reached its highest level in more than two years, with volumes now back in line with pre-pandemic levels, having trailed by around 20% at the start of the year.
“The uneven availability of properties for sale across the country, relative to demand, also continues to underpin prices. Higher mortgage rates compared to a few years ago may have made some homeowners hesitant to sell, to avoid triggering an immediate increase in their monthly mortgage cost when they move. Additionally, new build completions were at their lowest level since 2018, excluding the pandemic lockdown periods.
“Looking ahead to 2025, despite the positive trends we’ve seen over recent months, there’s no doubt mortgage affordability remains a challenge for many buyers. While further cuts to Bank Rate are still on the cards, the pace looks likely to be more gradual than previously anticipated, and many homeowners with older fixed-rate deals ending next year face refinancing at much higher rates.
“But with employment conditions remaining positive, buyer demand should continue to hold up well. We expect modest house price growth in 2025, likely a little lower than this year at up to +3%, along with a further small increase in the number of transactions.”
Toby Leek, NAEA Propertymark president comments:
“Mortgage lenders have introduced more competitive mortgage products to the market compared to those seen last year, however with the slight dampening news of a rise in inflation, it is likely that mortgage offers will only continue improving once inflation tracks downward so that interest rates can be cut.
“With wages on a slight upward trajectory and affordability pressures easing for many, buyers and sellers will gain the extra confidence and financial boost needed to make their next home move a reality. Alongside this, home movers across England and Northern Ireland will be pushing their next home move in order to beat the commencement of rises in Stamp Duty from April 2025 so a flurry of market and mortgage activity is to be expected in the coming months.”
