Annual house price growth halves to 3.5% – ONS

Annual house price growth in the UK has halved, with prices rising by just 3.5% in the year to April, according to the Office for National Statistics (ONS).

This followed a 7% rise in house prices in the 12 months to March 2025.

The average home now costs £265,000.

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This is the first slowing of UK annual house price inflation since December 2023. The ONS said it was caused by a price fall between March 2025 and April 2025, which coincided with stamp duty changes.

The ONS data is the most comprehensive of the house price indices as it includes all cash and mortgaged transactions. However, it has a time lag of up to two months, as it takes a while to process conveyancers’ submissions to the Land Registry after a sale is completed.

In terms of May house prices, Halifax has reported that property prices fell by 0.4%, meaning annual growth has dropped further to 2.5% (down from the lender’s 3.2% reading in April). In contrast, Nationwide said property prices edged up slightly, with a 3.5% rise in the year to May, up from 3.4% a month earlier.

Tom Bill, head of UK residential research at Knight Frank, comments: “The UK housing market is still in recovery mode after the stamp duty cliff edge in April but prices are being kept firmly in check by an overhang of supply.”

Sarah Coles, head of personal finance at Hargreaves Lansdown, points out that the slowing of annual price rises is notable, because the pace – as recorded by the ONS – had been rising since the end of 2023.

She adds: “However, it might not be anything to keep sellers up at night, because it was always expected in the aftermath of the stamp duty holiday. The sheer cost of property also kept a lid on price rises during the holiday, so this wasn’t a steep climb and a dramatic descent. It was more of a gentle incline followed by a saunter downhill.”

What’s the outlook for the property market for the rest of this year?

The trajectory of house prices for the rest of this year will depend on several factors, such as mortgage rates, the state of the economy and whether property buyers are worried about potential tax rises in the future.

The Bank of England will announce its next interest rate decision tomorrow (19 June) but the consensus is that rates are expected to remain at 4.25%.

While Bill at Knight Frank doesn’t expect a rate cut before August, he says the “weak state of the UK economy is putting downwards pressure on mortgage rates, which should support demand in the short term”.

According to Mark Harris, chief executive of the mortgage broker SPF Private Clients, the mortgage market looks buoyant.

“Lenders have plenty of liquidity and are showing that they are keen to lend. Mortgage rates are steady on the whole, with some lenders continuing to reduce rates and ease criteria, helping borrowers take on bigger mortgages than they might have been able to just a short while ago.

“There are also signs of innovation with regard to helping first-time buyers in particular, which is good for the overall health of the housing market as it enables those further up the ladder to make their moves."

So, relatively low mortgage rates – especially compared to recent years – should help support house prices in the months to come.

However, some buyers may be waiting for rates to drop further.

Darrell Walker, group sales director at Chetwood Bank for ModaMortgages and CHL Mortgages for Intermediaries, notes: “With the Bank of England expected to hold the base rate at 4.25% tomorrow, taking a conservative approach amidst persistent inflation and global uncertainty, there are likely to be some prospective buyers who are sitting tight and waiting for rates to come down before entering the market.”

Bill highlights another potential headwind for the property market: “As activity gathers momentum, what buyers and sellers could do without this summer is a re-run of last year and a game of ‘guess the tax rise’ ahead of the autumn Budget.”

Amy Reynolds, head of sales at Richmond estate agency Antony Roberts, is optimistic about the next few months, saying that “a modest uptick in property prices is to be expected given that the spring/summer market is traditionally a time when people move and the market is at its busiest”.

She adds: “There’s still plenty of money and desire to buy in the core price ranges. Surprisingly, we are seeing a rise in first-time buyer activity even though the stamp duty holiday has ended.

“Many are receiving help from family and are likely being driven by the pressures in the rental market, where demand far exceeds supply and rental listings have dropped sharply as landlords exit the sector."