UK house prices increased by approximately 4.7% in 2024, according to data from Nationwide, with the average home costing £269,426 by December. Despite affordability challenges, the housing market showed resilience, although prices remain below their mid-2022 peak.
Nationwide highlighted terraced homes as the fastest-growing segment and noted that Northern Ireland led the UK in price growth, with northern England also outperforming the south. However, the housing market in 2025 may face uncertainty due to fluctuating interest rates, stamp duty changes, and broader economic challenges.
Buyers in England and Northern Ireland will face a higher stamp duty burden from April, with thresholds dropping from £250,000 to £125,000 for most buyers, and from £425,000 to £300,000 for first-time buyers. These changes are expected to drive a temporary increase in sales before their implementation, followed by a potential slowdown.
The Bank of England is anticipated to begin lowering interest rates gradually, starting in February, which could encourage lenders to offer more competitive mortgage rates. However, Bank of England Governor Andrew Bailey cautioned that economic uncertainty makes precise predictions difficult.
Nationwide’s chief economist, Robert Gardner, emphasized the challenge of high property prices relative to earnings, compounded by record rental growth, which has limited savings potential for renters. Holly Tomlinson of Quilter investment firm warned that the stamp duty changes might add further hurdles for first-time buyers.
While falling mortgage rates and rising wages might improve affordability, some analysts view UK Finance’s prediction of a 10% rise in mortgage lending in 2025 as overly optimistic. Fixed-rate mortgage holders, who represent 80% of mortgage customers, will continue to face rising costs as their deals expire, with many expected to see monthly repayments increase by an average of £146 over the next two years.
Nationwide’s data reflects trends in its own mortgage lending and excludes cash purchases and buy-to-let transactions, which account for about a third of the market. Rival lender Halifax is expected to release its 2024 data shortly.
