Daniel Hilton
UK house prices had a wobble in the wake of stamp duty changes but the property market could be starting to pick up.
Buyers and home movers rushed transactions through in the first three months of 2025 before the stamp duty allowances dropped. This resulted in a busy start to the year, followed by a more subdued period.
The latest data from Halifax paints a resilient picture overall. Prices increased by 0.4% in July, the biggest monthly increase recorded by the lender since the start of the year. It brings the average property to £298,237, which is 2.4% higher than a year ago.
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Nationwide also reported a strong month in July, with prices rising by 0.6% on a monthly basis and 2.4% on an annual basis, bringing its estimate of the average property to £272,664. We look at the different methodologies and which house price index is best in a separate piece.
“Looking through the volatility generated by the end of the stamp duty holiday, activity appears to be holding up well,” said Robert Gardner, Nationwide’s chief economist.
“Indeed, 64,200 mortgages for house purchases were approved in June, broadly in line with the pre-pandemic average, despite the changed interest rate environment.”
An increase in activity won’t necessarily push house prices up significantly, though, as a glut of supply is keeping sellers in check when setting an asking price. According to Zoopla, there are 12% more homes on the market than a year ago.
Mortgage affordability testing has been relaxed
Some lenders have loosened their affordability tests in recent months following encouragement from the regulator, which could be contributing to the increase in activity as more prospective homeowners are able to secure a mortgage.
“Those using a mortgage can borrow up to 20% more than they could three months ago, with no change to their income or the mortgage rate they’re offered,” said Richard Donnell, executive director of research at Zoopla.
Despite this, affordability challenges remain. Interest rates are higher than their long-term average and inflation is stretching household budgets. This could deter existing homeowners from upsizing, particularly if a move would require them to take on more debt.
Those coming to the end of a five-year mortgage deal will also see their monthly repayments jump when they refinance, if they agreed their original rate before interest rates started rising at the end of 2021.
There could be better news for those coming to the end of a two-year fixed deal, though.
“Moneyfacts data shows that the average two-year fix in August 2023 was 6.85%, which has now dropped to 5% today. For someone with £400,000 of borrowing, that equates to a £451 a month drop in their repayments – or just over £5,400 a year,” said Laura Suter, director of personal finance at investment platform AJ Bell.
What do official house price figures show?
The most authoritative source on house prices is HM Land Registry. Its dataset covers more of the market than Halifax and Nationwide, because it includes cash purchases as well as those financed through a mortgage.
The main problem is that Land Registry data is published with a six-week time lag, meaning other sources can give a better snapshot of current market conditions.
The latest report shows prices rose by 1.1% on a monthly basis and 3.9% on an annual basis in May. It brings the average UK property to £269,000 – around £10,000 higher than a year ago.
Naturally, there are regional variations when it comes to house price growth.
Among the UK nations, prices are growing at the fastest rate in Northern Ireland (9.5% annually). Scotland comes in second (6.4%), followed by Wales (5.1%) and England (3.4%).
Of the English regions, the North East is experiencing the fastest growth (6.3%). The South West saw the lowest level at 1.9%.
Using the “house prices in your area” report from the Office for National Statistics can help you understand how prices have changed in your borough or local authority area. This also uses HM Land Registry data.
Are property asking prices going up?
Asking prices are a useful barometer for market sentiment as it currently stands. These snapshots tend to be published only a few weeks after the data was recorded. The drawback is that asking prices don’t necessarily reflect the final sold price.
Data from Rightmove shows that asking prices fell by 1.2% in July, the biggest slump for the month in over 20 years, with sellers asking for less amid an increasingly competitive market.
The average asking price for a property is now £373,709 – £4,531 less than a month ago, and just 0.1% higher than a year ago.
Colleen Babcock, property expert at Rightmove, said the decade-high number of houses on the market means buyers can quickly spot when a home looks overpriced compared to others.
“It appears that more new sellers are conscious of this and are responding to this high-supply market with stand-out pricing to entice buyers and get their home sold,” she added.
This appears to be the case across the UK, but has been particularly felt in the UK’s capital. Asking prices in Greater London fell by 1.5% in July, while prices for prime inner London properties dropped by 2.1%.
This price fall is reflected in every UK region apart from the East Midlands, where asking prices were static, and the North East, where asking prices grew by 1.2%.
How much will house prices rise overall in 2025?
Some forecasts for the future of house prices have been revised down in recent weeks, despite activity picking up as stamp duty changes recede into the distance.
Rightmove now expects the average asking price for a home to rise by just 2% over the course of 2025, a significant downgrade from its 4% forecast at the start of the year.
Zoopla has also halved its forecast from 2% to 1% due to a greater supply of homes for sale and mortgage rates remaining higher than expected.
“This level of house price growth is not necessarily a bad thing for the UK housing market,” Donnell said.
“It allows affordability to improve, as long as there is enough market confidence for people to continue listing their homes, agreeing sales and getting the house move they’re after.”
It won’t necessarily come as good news to those who view their property as an investment, though, as this growth rate is significantly lower than inflation.
If you have a large mortgage, it is also in your interest for house prices to rise more rapidly so that your debt represents a smaller portion of the overall house price.
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