The latest Nationwide House Price Index has just been released, revealing a softening in the annual rate of house price growth to 4.1% in January, compared with 4.7% in December.
House prices are up 0.1% month-on-month, while there is little change in overall rate of home ownership in recent years despite affordability pressures.
| Headlines | Jan-25 | Dec-24 |
| Monthly Index* | 541.0 | 540.5 |
| Monthly Change* | 0.1% | 0.7% |
| Annual Change | 4.1% | 4.7% |
| Average Price
(not seasonally adjusted) |
£268,213 | £269,426 |
* Seasonally adjusted figure (note that monthly % changes are revised when seasonal adjustment factors are re-estimated)
Commenting on the figures, Robert Gardner, Nationwide’s Chief Economist, said: “The housing market continues to show resilience despite ongoing affordability pressures. As we highlighted in our recent affordability report, while there has been a modest improvement over the last year, affordability remains stretched by historic standards.
“A prospective buyer earning the average UK income and buying a typical first-time buyer property with a 20% deposit would have a monthly mortgage payment equivalent to 36% of their take-home pay – well above the long-run average of 30%.”
The data shows that house prices remain high relative to average earnings, with the first-time buyer house price to earnings ratio standing at 5.0 at the end of 2024, still well above the long run average of 3.9. Consequently, the deposit hurdle remains high.
“This is a challenge that has been made worse by the record increase in rents in recent years, which, together with the cost-of-living crisis more generally, has hampered the ability of many in the private rented sector to save,” said Gardner.
Gardner continued: “It’s not surprising that a significant proportion of first-time buyers have to draw on help from friends and family to raise a deposit. In 2023/24, around 40% of first-time buyers had some assistance raising a deposit, either in the form of a gift or loan from family or friends, or through an inheritance.
“Despite these challenges, there has been relatively little change in overall levels of home ownership in recent years. The latest English Housing Survey produced by the Ministry of Housing, Communities & Local Government (MHCLG) showed homeownership rate remained stable in 2024 at 65%.”
There was a marginal rise in the number of people owning their home with a mortgage, although the majority of homeowners (around 55%) own outright, which is largely a reflection of demographic trends. The proportion of households in the private rented sector remained stable at 19%.
Looking at trends over the long term, homeownership rates among younger age groups, in particular those aged 25-34 and 35-44, remain well below their 2004 peaks. Homeownership amongst those aged 25-34 has been gradually improving over the last decade however and now stands at 45%, compared to 36% in 2014, though still below 2004 peak of 59%.
The number of households in England owning their homes outright has increased by 1.3 million over the past ten years to reach 8.7 million. This reflects demographic developments, in particular a rise in the number of older households (aged 65+), where the number owning outright has increased from 4.5 million to 5.4 million over the last decade.
Industry reactions:
Jeremy Leaf, north London estate agent and a former RICS residential chairman, commented: “Price growth is softening, partly in response to a new year bounce in supply but also as the impact of the spike in first-time buyer demand prompted by April’s withdrawal of the stamp duty concession falls away.
“Looking forward, although wages have been outpacing inflation over recent times, which has helped to boost confidence, affordability concerns have never gone away. The market remains tight and little change is expected over the next few months at least, irrespective of any possible interest rate reductions.”
Tom Bill, head of UK residential research at Knight Frank, said: “Higher borrowing costs are weighing on buyers but demand still feels artificially strong. Sub-4% mortgage offers that pre-date the Budget and an April rise in stamp duty means demand in the first quarter of the year is likely to be more robust than in the second. Until rate cut expectations improve and mortgages starting with a 3 re-appear, we expect further downwards pressure on house prices.”
Amy Reynolds, head of sales at Antony Roberts, said: “The first half of the month was a bit slow but it has turned out to be a busier January than normal.
“The stamp duty holiday has helped, with an increase in sales agreed in those chains where there is a first-time buyer keen to take advantage of the discount before the end of March. While this has been welcome, there is concern that one the stamp duty holiday ends, there will be a dip in activity and transactions.
“The value of a stamp duty incentive to first-time buyers is instant – it is real cash in their pockets, allowing someone to buy who otherwise might not be able to and this impacts those trying to move because they need a first-time buyer at the bottom of the chain in order for the second stepper to move on.
“It is the sale of larger homes that stimulates the economy and those higher value transactions brings in significant revenue. We would therefore urge the government to reconsider and introduce much-needed further stamp duty concessions in the Spring statement.”
Iain McKenzie, CEO of The Guild of Property Professionals, commented: “A year-on-year comparison will favour 2025 over 2024, with the market starting on a more positive footing so far. An increase in the number of homes for sale has provided buyers with more choice, and the increased number of new buyers into the market has led to heightened activity.
“Momentum built up towards the end of last year has carried over into 2025, with market activity bolstered by a rush to complete transactions ahead of the impending Stamp Duty changes in April.
“When these Stamp Duty changes come into effect, we could see a shift in buyer behaviour, with purchasers potentially focusing on areas offering more homes within the new thresholds. Additionally, negotiation tactics may come into play, particularly for properties priced near the threshold.
“Mortgage rates are anticipated to decline marginally this year, although this will depend on a reduction in pressure on global market interest rates, alongside the Bank of England’s decision to cut the base rate. If forecasts are accurate, the first base rate cut could occur at the upcoming meeting on 6 February.
“Mortgage rates are expected to range between 4% and 5% during 2025. While rates remain slightly elevated, buyers are approaching the market with caution, making accurate pricing critical to maintaining momentum.”
Jonathan Handford, managing director at Fine & Country, said: “January is often a strong indicator of the year ahead in the property market, and this year’s performance so far paints a positive picture.
“Although growth slowed in January year-on-year, month-on-month prices rose slightly.
“Strengthening buyer confidence, supported by a more stable economic backdrop, continues to drive demand. Last year’s steadying inflation rates and the gradual reduction in interest rates helped to restore market sentiment, providing a solid foundation for growth in 2025.
“Another key factor driving activity is the anticipation of tax changes, particularly the adjustments to stamp duty thresholds set to take effect in April. This has encouraged buyers to act sooner rather than later to maximise potential savings.
“Other indicators also point to a strong start to the year. Zoopla recently reported that the market in early 2025 is outperforming both 2024 and 2023, with buyer demand up 13% year-on-year in January and 10% more homes available. While rising demand typically puts upward pressure on prices, greater housing supply could help temper excessive price increases, ensuring the market remains accessible.
“A key demographic that will determine the market’s sustainability this year is first-time buyers. While the looming stamp duty changes have fueled activity among this group, a long-term approach is needed to prevent a slowdown once the changes take effect. Without continued support measures, affordability concerns could resurface, making it harder for first-time buyers to get onto the property ladder.
“Looking ahead, a ‘likely’ interest rate cut by the Bank of England in February could further boost the market by prompting lenders to lower mortgage rates. However, the extent and timing of cuts depend on inflation trends — if inflation eases, rate reductions are likely, but persistent pressures could delay them.
“Overall, the UK property market enters 2025 with signs of stability held up by modest growth. The coming months will reveal whether these trends hold or if affordability concerns and inflation start to weigh on growth. With key policy changes ahead, a balanced approach will be vital to sustaining stability and accessibility for buyers.”
Nathan Emerson, CEO of Propertymark, commented: “Moving into 2025, it’s positive to see that house prices and mortgage lending remain resilient despite continued affordability pressures. Currently, it’s likely a lot of movement in the market is due to people wanting to push through with their purchases and sales before the Stamp Duty rises in England and Northern Ireland in April. However, one aspect helping maintain momentum in the marketplace is the fact that mortgage rates and financial pressures are slowly improving for those looking to make a move.
“Propertymark member agents have reported that new buyers registered per branch have on average increased year on year by 44%. Therefore, with demand rising, now is potentially a great time to consider putting your house on the market and taking advantage of current market conditions.”
Matt Thompson, head of sales at Chestertons, said: “In January, the property market saw particularly high demand from first-time buyers who were motivated to beat April’s stamp duty deadline. This spike in buyer activity led to the majority of properties exchange hands for the asking price although some sellers, especially those in a rush to sell, agreed to enter price negotiations. As there is still time to benefit from the current stamp duty threshold, we expect more first-time buyers to enter the market over the coming weeks.”
Jonathan Hopper, CEO of Garrington Property Finders, added: “January’s cooling price inflation is a welcome sanity check for a market which built up a significant head of steam at the end of 2024.
“Let’s be clear, the reduction in the pace of price growth is modest. Average prices have risen 2% in just three months, and at 4.1% the annual rate of inflation is still higher than it was in every month of 2024 except December.
“There’s still plenty of demand in the market too. Estate agents rang in the New Year with a jump in buyer enquiries and the online property portals reported record search traffic over the Christmas period.
“Yesterday the Bank of England confirmed a surprise jump in the number of mortgages approved in December, and these will feed through into purchases in the coming weeks and months.
“Two factors are powering this momentum – the final weeks of the ‘stamp duty stampede’ as many first-time buyers race to complete their purchases before the stamp duty thresholds change at the end of March.
“The second is the feeling that cheaper mortgages are on their way. Next week the Bank of England is widely expected to reduce its Base Rate, and this will gradually reduce the cost of borrowing.
“Yet for all the momentum in the market, price rises are neither inevitable nor unquestioning. Buyers remain intensely price-sensitive, and the abundance of properties for sale means many won’t hesitate to walk away from homes they like but feel are overpriced.
“The pace of price rises varies widely by region too, and there’s a clear north-south divide. Price rises are modest or even flat in some very desirable parts of southern England, and here we’re seeing buyers ask for, and get, significant discounts.”
