21 May 2025
If you are covering the latest UK house price index, please see the following comment from Karen Noye, mortgage expert at Quilter:
“The government’s UK house price index is a lagging indicator, but it paints a very similar picture to those already provided by mortgage lenders in that the rush to buy caused by the stamp duty changes in April resulted in a marked uptick in house prices.
"Annual property price growth reached 6.4% in March, up from 5.5% in the twelve months to February. On a monthly basis, prices rose by 1.1%, and the average house price came in at £271,000, up a considerable £16,000 compared to the same period last year. Those in the North East saw the greatest rise in house prices, with a jump of 4.2% on a monthly basis, while London was the only the region that saw a decrease in house prices with a fall of 0.3%.
“First time buyers had a disproportionately high increase in purchase prices. The average house price reached £230,857, up 1.7% on a monthly basis and a huge 7.1% annually. This is likely as a result of many rushing to buy ahead of the change in stamp duty which would have added a hefty tax bill to the already expensive process. In an effort to save on stamp duty, many first-time buyers may have overpaid – leading to higher long-term mortgage costs.
“Borrowing costs have improved somewhat recently, with mortgage rates lowering following the Bank of England’s rate cuts. However, with inflation spiking to 3.5% and the economy doing better than had been feared at the start of the year, there is a chance it will hold off on further cuts for now and mortgage rates would follow suit. What’s more, the changes to stamp duty have added to upfront costs, particularly for those purchasing in higher-value areas. For example, a first-time buyer purchasing a £500,000 property now faces a stamp duty bill of £10,000, compared with £3,750 under the previous regime. This shift in taxation has added yet another affordability challenge at a time when many buyers are already stretched.
“Given the now even higher cost of moving home, prospective buyers will have considerably less incentive to move, and first-time buyers may simply be priced out until they are able to build their savings to cover the higher costs. Looking ahead, we are likely to see a marked slowdown in property transactions and a subsequent stalling of prices. Instead of a sharp decline, the market is more likely to stabilise due to constrained supply and ongoing affordability challenges."
