But annual price growth is losing momentum
The UK housing market started 2025 on an upward trajectory, with mortgage lender Halifax reporting average property prices climbed by 0.7% in January, reversing a slight 0.2% dip in December.
This increase pushed the average home price to a new record high of £299,138. However, the latest Halifax House Price Index also showed that annual house price growth slowed to 3%, marking the weakest increase since July 2024.
“Affordability is still a challenge for many would-be buyers, but the market’s resilience is noteworthy,” said Amanda Bryden (pictured left), head of mortgages at Halifax. “There’s strong demand for new mortgages and growth in lending. With a stamp duty increase looming, some of this demand may have come from first-time buyers eager to complete transactions before the end of March.
Bryden added that despite geopolitical uncertainties, and waning consumer confidence, other key indicators look fairly positive for the housing market.
“The Bank of England has made its first base rate cut of the year, and there are probably more to come,” she said. “Household earnings are expected to continue outpacing inflation – albeit that gap may narrow – easing some of the financial pressure still being felt from the cost-of-living squeeze.
“As things stand, mortgage rates are likely to hover between 4% and 5% in 2025, influenced by both global financial markets and domestic monetary policy. Over the past year, buyers have been getting used to this new normal, understanding that rates are unlikely to return to the historical lows of 1%.”
Mark Harris (pictured centre), chief executive of mortgage broker SPF Private Clients, believes that the Bank of England’s recent rate cut — and the prospect of further reductions — could give borrowers more confidence to enter the market.
“Swap rates continue on a downwards path with some lenders dropping their mortgage rates, in part reversing recent increases,” he said. “The latest rate cut was largely expected by the markets and has been factored into pricing already but a continual decline in swaps would enable lenders to price more keenly, easing borrowers’ affordability concerns.”
Tanya Elmaz (pictured right), director of intermediary relations at Together, noted that the start of the new year has seen a rise in consumer confidence which has been reflected in the property market with house prices rising.
“Hopefully, the costs of borrowing for first-time buyers and those who need to remortgage their homes should begin to fall, improving housing affordability for millions of people,” she said. “Together’s Residential Property Market Report indicates house prices and property sales are expected to rise by 17% between this year and 2029.
“With borrowing costs falling following lower than expected inflation figures published last month, the market is looking set for a good first quarter.”
Regional trends in house prices
The January 2025 Halifax House Price Index also indicated a slowdown in annual house price growth in two-thirds of UK nations and regions at the start of the year.
Northern Ireland remained the strongest-performing region, though its annual price growth cooled to 5.9% in January from 7.3% in December. The average property price in the region now stands at £205,473. Wales recorded a 3.6% annual increase, with homes now averaging £227,397, while Scotland continued to see slower growth, with prices rising by 2.4% year-on-year to £210,690.
In England, the North East surpassed the North West as the fastest-growing region, with annual house prices rising 5.2% to an average of £178,696. This marks the first time since September 2023 that the North West has not led the English regions in price growth. London remains the most expensive housing market in the UK, with average property prices climbing 2.8% year-on-year to £548,288.
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