"While there has been a modest improvement over the last year, affordability remains stretched by historic standards"
- Robert Gardner - Nationwide
Nationwide's latest report has revealed that the price of a typical home in the UK edged up by 0.1% in January to sit at £268,213.
Annual house price growth eased to 4.1% in January - down from 4.7% in December, possibly revealing signs of
price negotiations amid high demand from first-time buyers pushing to beat April’s stamp duty deadline.
Nationwide data also showed that there has been little change in the overall rate of home ownership in recent years despite affordability pressures.
“The price of a typical UK home rose by 4.1% year on year in January, a modest slowing in the annual pace of growth compared with December. House prices increased by 0.1% month on month, after taking account of seasonal effects," noted Robert Gardner, Nationwide's Chief Economist, “The housing market continues to show resilience despite ongoing affordability pressures,"
He added, "As we highlighted in our recent affordability report, while there has been a modest improvement over the last year, affordability remains stretched by historic standards. A prospective buyer earning the average UK income and buying a typical first-time buyer property with a 20% deposit would have a monthly mortgage payment equivalent to 36% of their take-home pay – well above the long-run average of 30%.
“Furthermore, house prices remain high relative to average earnings, with the first-time buyer house price to earnings ratio standing at 5.0 at the end of 2024, still well above the long-run average of 3.9. Consequently, the deposit hurdle remains high. This is a challenge that has been made worse by the record increase in rents in recent years, which, together with the cost-of-living crisis more generally, has hampered the ability of many in the private rented sector to save.
“Therefore, it’s not surprising that a significant proportion of first-time buyers have to draw on help from friends and family to raise a deposit. In 2023/24, around 40% of first-time buyers had some assistance raising a deposit, either in the form of a gift or loan from family or friends or through an inheritance," he said.
Levels of home ownership remain stable
“Despite these challenges, there has been relatively little change in overall levels of home ownership in recent years. The latest English Housing Survey produced by the Ministry of Housing, Communities & Local Government (MHCLG) showed homeownership rate remained stable in 2024 at 65%," explained Gardener.
“There was a slight increase in the number of people owning their home with a mortgage, although the majority of homeowners (around 55%) own outright, which is largely a reflection of demographic trends. The proportion of households in the private rented sector remained stable at 19%,"
Gardener concluded, “Looking at trends over the long term, homeownership rates among younger age groups, in particular those aged 25-34 and 35-44, remain well below their 2004 peaks. Homeownership amongst those aged 25-34 has been gradually improving over the last decade however and now stands at 45%, compared to 36% in 2014, though still below 2004 peak of 59%.
“The number of households in England owning their homes outright has increased by 1.3 million over the past ten years to reach 8.7 million. This reflects demographic developments, in particular a rise in the number of older households (aged 65+), where the number owning outright has increased from 4.5 million to 5.4 million over the last decade.”
Nathan Emerson, CEO of Propertymark, comments: “Moving into 2025, it's positive to see that house prices and mortgage lending remain resilient despite continued affordability pressures. Currently, it’s likely a lot of movement in the market is due to people wanting to push through with their purchases and sales before the Stamp Duty rises in England and Northern Ireland in April.
"However, one aspect helping maintain momentum in the marketplace is the fact that mortgage rates and financial pressures are slowly improving for those looking to make a move.
“Propertymark member agents have reported that new buyers registered per branch have on average increased year on year by 44%. Therefore, with demand rising, now is a great time to consider putting your house on the market and taking advantage of current market conditions.”
Iain McKenzie, CEO of The Guild of Property Professionals, said: “A year-on-year comparison will favour 2025 over 2024, with the market starting on a more positive footing so far. An increase in the number of homes for sale has provided buyers with more choices, and the increased number of new buyers has led to heightened activity.
“Momentum built up towards the end of last year has carried over into 2025, with market activity bolstered by a rush to complete transactions ahead of the impending Stamp Duty changes in April.
“When these Stamp Duty changes come into effect, we could see a shift in buyer behaviour, with purchasers potentially focusing on areas offering more homes within the new thresholds. Additionally, negotiation tactics may come into play, particularly for properties priced near the threshold.
“Mortgage rates are anticipated to decline marginally this year, although this will depend on a reduction in pressure on global market interest rates, alongside the Bank of England’s decision to cut the base rate. If forecasts are accurate, the first base rate cut could occur at the upcoming meeting on 6 February.
“Mortgage rates are expected to range between 4% and 5% during 2025. While rates remain slightly elevated, buyers are approaching the market with caution, making accurate pricing critical to maintaining momentum.”
Tom Bill, head of UK residential research at Knight Frank, said: “Higher borrowing costs are weighing on buyers but demand still feels artificially strong. Sub-4% mortgage offers that pre-date the Budget and an April rise in stamp duty mean demand in the first quarter of the year is likely to be more robust than in the second. Until rate cut expectations improve and mortgages starting with a 3 re-appear, we expect further downward pressure on house prices.”
