Nationwide’s latest figures show a monthly rise in property prices of just 0.1% for January this year. That’s lower than previously predicted and an indicator that the cost of living and higher mortgage interest rates are still impacting would-be buyers.
Despite this, the figure is still 4.1% higher than house prices a year ago. It brings the cost of the average UK property to £268,213, according to the mortgage lender. Nationwide predict prices to rise by between 2% and 4% this year.
Only last week, data from online property portal Zoopla showed that January 2025 was already faring better than January 2024 and 2023. Demand was up 13% and 10% more properties were available for sale.
Quarter percentage cut expected to loosen mortgage rates
In terms of mortgage interest rates, analysts a predicting a quarter percent cut in the Bank of England base rate this Thursday. That would bring the figure to 4.5%. A total of three interest rates cuts are expected by the end of the year, so that affordability should improve for many house buyers. Certainly, current mortgage interest rates are nowhere near the 6.22% they reached in the summer of 2023, yet the 1.1% of summer 2021 remains a distant dream for many.
The market is currently experiencing a surge in sales, thanks to the rush to beat the Stamp Duty changes on April 1. Then, buyers will have to pay Duty on properties which are less expensive than at present. Meanwhile, property costs are historically high compared to earnings. The current property-wages ratio is 5.0 whereas typically the average is 3.9.
Fewer home owners amongst younger demographics
Figures from the latest English Housing Survey by the Ministry of Housing, Communities and Local Government (MHCLG), showed around 65% of homes were privately owned last year. Of those though, there was a significant drop in ownership between those aged 25 to 34 and 35 to 44, compared to two decades ago.
Buyers have more homes to choose from, interest rates are set to fall, and sellers will have to be more realistic regards pricing.
At least that’s the findings of the latest Rightmove report which reveals there are 11% more properties coming to market than at the same time last year. In fact, the number of properties listed for sale in estate agencies is the highest it’s been for more than a decade. The figures refer to January 2025.
Another plus for buyers is that, at £366,189, the average property value is now around 9% less than it was in May last year (when it was a record-breaking £375,131). Rightmove anticipates house prices will rise by 4% this year.
Hopes that mortgage interest rates may reduce throughout the year were boosted by a fall in inflation to 2.5% in November. Interest rates for a typical two-year fixed rate deal is currently sitting around 4.97%. For five-year deals it’s roughly 4.75%.
A spokesperson for Rightmove commented: “We’ve also seen a strong start to the year in new seller asking prices, though given the higher-than-anticipated seller competition, we would expect this to slow down over the next few months.”
Nationwide report gives glimmer of hope for first-time buyers
Meanwhile, a new report by Nationwide shows that property has become more affordable. Based on last year, the data found that a first-time buyer with a 20% deposit needs to typically allocate 36% of their take-home pay to the mortgage. Although the percentage allocation fell last year, it’s still higher than the traditional 30%.
An increase in the cost of living, added to a rise in the cost of renting makes it increasingly difficult for first-time buyers to save for a deposit – to the extent nearly half (40%) reveal they received financial help from family and friends. Around 54% of property transactions carried out last year were for first-time buyers.
But Yopa’s CEO Verona Frankish said only an increase in construction will really make the difference to affordability – for all sectors of society.
“We need to see the government deliver on its promises of building more homes if any meaningful progress is to be made with respect to addressing housing affordability across the nation,” she concluded.
The average property in the UK may cost £269,426 but that’s still lower than the peak of frenzied post-lockdown buying two years ago.
Then (August 2022) the figure for the typical UK home was £273,751. This is according to the last Nationwide House Index for 2024. Despite this, the December figure for 2024 is 4.7% higher than at the start of the year.
North-south divide continues unabated
The price increase indicates a clear north sound divide in England. Properties in the north of the country increased by 4.9% while in the south the figure was lower, at a more modest 2.2%.
Property analysts predict mortgage interest rates will fall this year – but not by much. And there’s no hard and fast rule as to when this will happen. The expectation though is enough to encourage buyers, with the first few months expected to be the busiest. That’s because the recent increased Stamp Duty allowances for first time buyers of £425,000 in England and Wales, and for those purchasing homes under the £250,000 threshold end on April 1. Last year first-time buyers made up 31% of all property sales.
Analysts predict 3% rise in property prices in 2025
Property agents Hamptons predict a 3% rise in house prices in 2025 and 3.5% the following year. Both they and property portal Rightmove believe this year will prove to be a buyers’ market for UK property. The latter predicts a rise in property figures for the London market of 4% over the next 12 months. They attribute much of this to major companies bringing employees back into the office rather than encouraging working from home.
Boxing Day property enquiries 20% ‘up’ on last year
Meanwhile the number of properties agents have on their books to sell is higher than any time within the past decade. In addition, Rightmove enquiries were 20% higher on Boxing Day 2024 than on the same day in 2023.
Landlords brace themselves for new regulations
The Renters’ Rights Bill is expected to be introduced in spring this year. One of the main concessions is that landlords will have to use a Section 8 notice to recover their property from bad or poor-paying tenants. It’s an area which is sure to prove newsworthy over the next 12 months. Watch this space…
This week’s decision to hold the Bank of England base rate will put a dent in house sales early next year say estate agents.
That’s because mortgage interest rates will remain the same, meaning property prices will still be out of reach to thousands of would-be buyers.
Two-thirds of bank committee voted for reduction
The Bank’s Monetary Policy Committee voted 6-3 to retain the rate at 4.75% rather than reduce it by 0.25 percentage points as some economists surmised. Those in favour of retaining the current bank rate said it was necessary in order to manage inflation. The Bank is currently aiming for an inflation target of 2%. Inflation sat at 2.6% last month – 0.3% higher than in October’s figure.
Despite this, many property experts are confident that there will be a fall in the base rate next year, and subsequently a drop in mortgage interest rates. Certainly, buyers and lenders alike will be hoping for a fall in rates as a result of Stamp Duty charges reverting to previous ratios on April 1.
Mortgage expert at property portal Rightmove, Matt Smith said he expected a typical mortgage interest rate to sit at around 4% by the end of next year. But he added: “This is dependent on the impact of a wide variety of unpredictable factors, including geo-political tensions and inflation.”
Former Royal Institute of Chartered Surveyors (Rics) chairman, Jeremy Leaf said a cut in the base rate would be particularly welcomed by first-time buyers, especially in light of increasing rental rates.
Scotland tops the league for house transactions
Meanwhile, in terms of property sales, Scotland topped the league for 2024. That’s according to recently released government figures. The Office of National Statistics data shows there were 54,428 property transactions north of the border, equating to 15% of the UK total.
The next highest region for property sales was the South East, with 14% of the total. Third was the North West, at 11%. Northern Ireland saw least properties sold, with a percentage rate of just 3.4%. Despite this, Belfast was the UK city in which most homes were sold, at 7333 properties. Second was Edinburgh and third, Glasgow. A total of 3994 properties were sold in Leeds, England’s highest city total, outside London.
More than one quarter of surveyors reported a rise in property prices in their region during November. That compared to just 16% of members of theRoyal Institution of Chartered Surveyors (Rics) in October.
The statistics bode well for the first few months of next year. That’s when the market is expected to speed up as would-be buyers try to beat the Stamp Duty changes at the start of April.
Property Portal Rightmove’s Tim Bannister reported recently that he expected the whole of 2025 to be a busy year for house transactions, predicting there would be around 1.15 million completed.
But senior economist at Rics,Tarrant Parsons, didn’t share his optimism. He believes currently high interest rates and the broader macroeconomy will still make buyers hesitate on such large purchases.
His concerns are borne out by figures released by the Office for National Statistics this week. The government data showed that the cost of the average property in England last year was 18.2 times above typical household income of £34,569. That was for the year to March last year while, at the same time, the typical property was valued at £298,000 – a ratio of 8.6. For poorer households the ratio was 18.2.
Mortgage rates to fall next year
Fixed mortgage rates are currently around 4.83% and 5.08% per cent for five-year and two-year products respectively. It’s expected these will reduce to around 4% by the end of 2025. They may even reduce in 2026, but analysts don’t expect them to fall to pre-cost of living rates. The expectation they will fall though is prompting more people to take out two-year mortgages.
More first-time buyers than last year
Rightmove reports there are 13% more first-time buyer enquiries than there were at the same time last year. Rents continue to rise, although Rics reported a 1% drop in enquiries list month. This may, of course, be due to the time of year.
In order to battle the house crisis Sir Keir Starmer has recently vowed to build 300,000 new homes annually. The previous Conservative government promised similar construction figures but 200,000 was the highest number of homes built in any one year.
Property prices have risen 4.8% over the past 12 months.
That’s according to the latest figures from the Halifax House Price Index, published today. The news brings the price of the average property in the UK to £298,083.
Biggest November jump for two years
The annual jump is the biggest since November 2022. Price growth is highest in Northern Ireland, at 6.8%. But the North West of England isn’t far behind, with growth of 5.9%. The rise in Wales was 4.1%. In Scotland, the picture for home owners wasn’t quite as rosy, with an increase in property prices of just 2.8% year-on-year. London increases were higher than north of the border. Property in the capital was, in fact, up 3.5%, bringing the cost of a typical home there to £545,439.
Head of Mortgages at the high street lender is Amanda Bryden. She said the rise in UK property prices was the fifth in a row. The monthly jump between October and November was 1.3%.
Ms Bryden added: “We are seeing improving levels of demand for mortgages. An easing in mortgage rates boosts buyer confidence.”
She did add though that the current economic situation exacerbated affordability difficulties for many would-be house buyers.
Propertymark CE Nathan Emerson insisted that with mortgage interest rates falling buyers are once again warming up to market conditions.
Analysts urge caution as cost of living continues to impact
Other analysts don’t necessarily share Emerson’s confidence though.
Karen Noye of Quilter admitted falling mortgage rates and general market stability had led to a ‘rebound in buyer activity.
But she was also conscious that rising cost of living was continuing to have an impact on buyers’ finances.
“For the housing market to maintain momentum, a balance will need to be struck between supporting demand and addressing affordability constraints,” she added. “That’s particularly the case because higher interest rates are likely to remain a feature of the market for some time.”
As expected, the Bank of England declared a second base rate cut this week, reducing the amount from 5% to 4.75%.
This is due to a lowered inflation figure, which is now sitting at less than 2%. It’s a rate which the Office of Budget Responsibility say could last until 2029, giving homebuyers renewed confidence of stable mortgage interest rates for the foreseeable future. The Bank’s first base rate cut this year was in August when it fell from 5.25% to 5%.
In anticipation of a 0.25% drop, mortgage rates had already begun falling in recent weeks. They are expected to go down even further in the next few days and weeks, giving a welcome injection to the property market. At the moment mortgage rates are the lowest for two years.
Base rate predictions for a longer trajectory
The base rate is expected to continue to fall over time, but this will be at a slower pace than previously predicted, following Labour’s ambitious borrowing and spending plans in the recent Budget.
Not only are there more properties coming on to the market – to the extent it is fast becoming a buyer’s market – but mortgage approvals too are on the up. October was in fact, the fourth month in a row where, with a total of 65,647 mortgages given the green light, figures have surpassed those of the previous month.
House prices at highest rate ever
Meanwhile, house prices reached their highest total ever in October, with the average property now sitting at £293,999. That’s according to the latest Halifax House Price Index. The price has increased 3.9% compared to the same period last year. Regionally, the biggest increase was in the north west of England, where the value of property jumped 5.9% year-on-year to £235,587.
The fall in mortgage interest rates isn’t the only fuel being added to the property market fire, however. The looming stamp duty deadline of April 1 is also accelerating growth. That’s because buyers are looking to secure a housing deal before stamp duty relief rates revert to their previous higher levels. Expect much activity from now and well on into 2025.
Landlords looking to sell one-bedroom properties shouldn’t have too much difficulty over the coming months.
That’s because, stamp duty thresholds and the ‘nil rate’ for first-time buyers, will revert to normal in April next year. And that means would-be first-time buyers will be rushing to buy and complete before the deadline looms. House price completions are currently taking around 152 days, according to the Rightmove property portal.
At the moment, buyers who purchase a property below £250,000 pay no stamp duty ie ‘nil rate.’ This cut-off point is likely to fall to £125,000 next year. By the same token, the threshold of £425,000 for first-time buyers could revert to £300,000. That means anyone purchasing a property at the UK average rate of £370,759 will have to pay an additional £3,538 in Stamp Duty Land Tax.
Rightmove’s Tim Bannister said that were the first-time buyer threshold of £425,000 to fall to £300,000 then only 37 per cent of properties would be stamp duty-free compared to 58 per cent today.
“This will particularly affect buyers in regions with higher property prices, such as London and the South East,” he added.
What buyers want in a property
Meanwhile, if you’re looking to sell your one-bedroom property then you’ll have a better chance of doing so if it has a breakfast bar or kitchen island and a good EPCA rating.
Estate agents Yopa found that properties with at least one of these three attributes, sold quicker than others of the same size.
The breakfast bar was deemed the most desirable feature (13.6 per cent of Yopa listings had one). Kitchen islands may not be possible in a smaller one-bed property, but it’s something that 12.6 per cent of all homes on the list offered. The same percentage of properties listed had a good EPC rating (of ‘C’ or above).
Other desirables that home buyers in general are looking for include a freestanding bath, wooden beams, high ceilings throughout and a walk-in clothes closet.
Figures released by the Office for National Statistics this week show property prices rose 2.8% from August 2023 to the same month in 2024.
The official statistics – which are reported every quarter – don’t deviate greatly from recent house price indexes and show that the market is indeed ‘on the up.’ House prices were, in fact, around £8000 higher than the previous year, bringing the cost of the average property to £292,924. August was the sixth month in a row in which property prices were higher on a year by year basis.
North West of England shows biggest jump in prices
In terms of regional variation, the biggest prices jumps were in the North West of England. There the average property jumped by 4.5% to £225,248.
The poorest property price rises over that 12-month period to August 2024 were in the South West, where property jumped just 0.8% to £320,774.
Analysts attribute the growth in property prices to increased interest in the market, thanks to lower mortgage interest costs and a settled economy with Labour proving triumphant in the general election. Added to this, interest rates are predicted to fall even further before the end of the year – thanks to an expected Bank of England base rate cut.
Property prices expected to remain stable for remainder of year
The increased interest in the market isn’t expected to wane up any time soon, meaning house prices are expected to remain stable for the foreseeable future.
Marc von Grundherr, Director of capital estate agents’ Benham and Reeves, isn’t expecting the upcoming Autumn Statement to bring any property purchasing incentives.
He added: “The housing market is likely to march on undeterred and we’re set for a very strong end to the year, despite the usual seasonal lull that comes with the Christmas period.”
And, of course, it wasn’t just in England that house prices exceeded their previous peak. Property in Northern Ireland rose by 6.4% year-on-year to £185,025. In Scotland the jump was 5.4% to an average £199,971 and in Wales, bricks and mortar investments rose 3.5% to £222,925.
An increase in the sale of second homes is putting up rental demand.
Changes to tax regulations and a possible increase in capital gains tax has seen landlords list their properties – to the extent almost one third of all properties listed last month were second homes. That in itself could signal an increase in existing rents as demand begins once again to far outstrip supply.
Majority of surveyors expect property prices to rise
The findings, from the latest report of The Royal Institution of Chartered Surveyors (RICS) backed up other house index figures released last week from the Nationwide and property portal Zoopla. They pointed to an accelerated UK property market – one in which property prices were expected to rise over the next year, according to more than half of surveyors interviewed.
Analysts refer to reduced mortgage interest rates as the kickstart the market needed. And these rates are expected to fall even further with expectations that the Bank of England will reduce its base rate by a quarter percent in early November. The Bank cut it from 5.25% in August – the first reduction in four and a half years.
Meanwhile Finance Minister Rachel Reeves warns she may increase capital gains tax from 33 per cent to 39 per cent in the budget at the end of this month.
Difficulties for today’s first-time buyers put into perspective
From second home owners to first time buyers, upmarket estate agency Hamptons this week showed just how difficult it is to access the property market today.
Their report showed that the typical mortgage payment for Generation Z (who were born in the late 1990s) is double that paid by previous generations. The typical sum for Generation Z is £1,739 a month. Millennials have had it much easier. Those born in the 1980s pay roughly £863 a month, while Baby Boomers (born in the 1960s) have been enjoying much lower mortgage costs of £775 on average.
Not surprisingly, the costs are down to a mixture of house price increases far outstripping inflation.
We use cookies to enhance your experience while using our website. If you are using our Services via a browser you can restrict, block or remove cookies through your web browser settings. We also use content and scripts from third parties that may use tracking technologies. You can selectively provide your consent below to allow such third party embeds. For complete information about the cookies we use, data we collect and how we process them, please check our Privacy Policy
Youtube
Consent to display content from - Youtube
Vimeo
Consent to display content from - Vimeo
Google Maps
Consent to display content from - Google
Our website may use cookies to personalise the experience. By using this website you agree to use of cookies.OKPrivacy
