The housing market is set for a busy few months as buyers look to beat changes in stamp duty thresholds from April. However, it is likely to be a year of two parts, with a corresponding slowdown in the housing market after those changes take place, pushing up the cost of buying a property.
For now, house price data is proving resilient. The latest report from HM Land Registry, published on 19 February, shows prices increased by 4.6% in 2024. This brings the average property price to £268,000, which is £12,000 higher than a year ago.1
Interest rates are expected to fall further over the course of 2025, with the Bank of England potentially cutting rates two or three more times before the year is out, based on forecasts from City analysts and economists. This would be good news for mortgage rates. Despite this, affordability challenges remain.
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Borrowing costs are still significantly higher than their long-term average, and recent data from Nationwide suggests the average first-time buyer is paying around five times their salary for their first home. The long-term average is 3.9 times earnings.
Furthermore, the inflation outlook remains volatile and any upward surprises in the data could cause mortgage rates to tick upwards again. For example, January’s inflation data (published on 19 February) came in higher than expected at 3%, causing volatility in the swap rates that underpin mortgage pricing.
The rate of house price growth could also slow later this year thanks to a greater supply of housing stock. Data from property website Rightmove, published in February, suggests the number of homes for sale is at a 10-year high.
Colleen Babcock, property expert at Rightmove, said: “New sellers are showing some pricing restraint after a fast start to the year, being mindful of both the high level of seller competition, and in England also of the looming stamp duty deadline and extra costs for some buyers.
“Agents report that some of the steam is coming out of new sellers’ price expectations to fit the changing market conditions, which is a sensible reaction to attract buyer interest, and it will also help to support activity levels.”
1It is worth pointing out that the official data was re-referenced in the latest report “to reflect the observed reduction in size of the ‘average’ UK property sold and its increased tendency to be in a cheaper part of the UK”. This is why the average house price figure appears lower than in last month’s report (£290,000).
What's happening with sold house prices?
Sold house prices are the most accurate indication of what is happening in the UK property market – and HM Land Registry is the most authoritative source.
The only drawback is that the transactions this index measures may have been agreed several months ago. As a result, it is not always a good indication of current market conditions.
Major lenders like Halifax and Nationwide also publish trusted house price data, but this is based on the lender’s valuation at the mortgage approval stage. This can differ from the actual sale price, but the idea is that it is near enough to the end of the home-selling process to offer a more realistic snapshot than initial asking prices.
Property website Zoopla also publishes a house price index, which uses sold prices, mortgage valuations and data for agreed sales. We look at which house price index is best in further detail in a separate article.
What do the latest reports show?
- HM Land Registry: House prices increased 4.6% on an annual basis in December. January’s report is not yet available.
- Nationwide: House prices increased 4.1% on an annual basis in January.
- Halifax: House prices increased 3.0% on an annual basis in January.
- Zoopla: House prices increased 1.9% on an annual basis in January.
Of course, there are big regional variations but 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.
Broadly speaking, the latest report from HM Land Registry suggests prices are growing at the fastest rate in Northern Ireland (9.0%), followed by Scotland (6.9%). Of the English regions, the North East is seeing the fastest growth (6.7%).
Meanwhile, London saw zero house price growth in 2024, with prices in the capital ending the year where they started. Prices in London are particularly high, with the average house now costing almost £549,000. This suggests affordability limits have become stretched.
Different property types are also seeing significant variations in price. Data from Zoopla shows the gap between the value of the average house and the average flat widened to a 30-year high in January. A typical house is now 67% more expensive than a flat.
“The search for space over the pandemic boosted demand for houses, while concerns over the running costs of flats (e.g. service charges and ground rents) has acted as a drag on flat prices. Building safety is another factor impacting demand for some recently built flats,” explained Richard Donnell, executive director of research at the property website.
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.
Rightmove’s house price index, based on asking prices, suggests house prices increased by 0.5% on a monthly basis in the first few weeks of February, below the typical 0.8% for this time of year. On an annual basis, prices were up 1.4%.
“This month’s lower price trend appears to be both a proactive measure, recognising higher costs for some buyers with England’s looming stamp duty deadline at the end of March, and a reaction to the record number of sellers who came to market early in 2025,” the property site explains.
Will house prices rise in 2025?
After boosting activity in the first three months of the year, stamp duty changes could dampen buyer demand from April. The tax-free threshold is due to drop from £250,000 to £125,000, and from £425,000 to £300,000 for first-time buyers.
The other thing to watch is interest rates. The Bank of England has said it will take a “gradual and careful” approach to reducing the base rate. Despite this, economists at institutions like Goldman Sachs and ING are still expecting roughly one cut per quarter throughout 2025, as the central bank walks the tightrope between supporting growth and squashing inflation.
There are risks to this outlook, though, including the possibility that US president Donald Trump expands his tariff regime, pushing up the rate of global inflation. Rising energy prices could also add fuel to the fire. Meanwhile, here in the UK, changes to employers’ National Insurance contributions (effective from April) could also push inflation up.
The Bank of England has now said it expects inflation to briefly hit 3.7% in the third quarter this year, largely driven by global rather than domestic pressures. If inflation heats up too much, it could limit the scope of interest rate cuts, potentially dampening the housing market by pushing mortgage rates higher too (not to mention denting household budgets).
Overall, real estate consultancy Knight Frank has said it expects house prices to rise by 2.5% in 2025, 3% in 2026 and 3.5% in 2027. Meanwhile, estate agent Savills has predicted that house prices will rise by 4% across the UK in 2025.
Naturally, there will be regional variations in the data. Savills expects a continuation of the north-south divide when it comes to house price growth, with prices rising more slowly in areas like London where affordability has become stretched.
The estate agent said it expects house prices to increase by 5.0% in 2025 in the North West, the North East, Scotland, and Yorkshire and the Humber. Meanwhile, prices in the East of England and the South West are forecast to increase just 2.5% during the year.
Finally, top-end properties in London are likely to experience a 4% drop in value, the agency said, as investors are hit by extra stamp duty charges (such as the 5% surcharge on second homes) and changes to non-dom rules.
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