19 February 2025
If you are covering the latest government house price index, please see the following comment from Holly Tomlinson, financial planner at Quilter:
"The latest house price data shows a market that remains surprisingly resilient, with annual price growth accelerating to 4.6% in December 2024, up from 3.9% in November. The average UK house price now stands at £268,000—£12,000 higher than a year ago. Affordability remains a significant challenge, particularly for first-time buyers, as house prices are still climbing, underpinned by supply constraints and regional disparities. Northern Ireland (9.0%) and Scotland (6.9%) are leading the charge, while London remains the weakest link, with prices stagnating over the past year.
"One potential positive came earlier this month when the Bank of England cut interest rates to 4.5%. Although widely expected, the move should help ease affordability pressures and may encourage more buyers to revive previously shelved plans. Lenders had already been trimming mortgage rates in anticipation, and with further rate cuts on the horizon, demand could see a gradual revival. For first-time buyers, this offers some hope, as lower mortgage rates could help make repayments more manageable. However, securing a property will remain a challenge—especially with the upcoming stamp duty changes in April. The first-time buyer threshold is set to drop from £425,000 to £300,000, potentially leaving buyers in higher-cost areas facing unexpected tax bills and an even steeper climb onto the housing ladder.
"More broadly, the cut to interest rates may provide much-needed momentum for the market. If buyers sense that borrowing costs have peaked and are on their way down, demand could increase, supporting house prices in the months ahead. However, persistent inflation, rising unexpectedly to 3.0% just this morning, may limit the Bank of England’s ability to reduce rates further, keeping mortgage costs elevated for longer. This balancing act between falling borrowing costs and affordability constraints will define the market’s trajectory in 2025. While lower rates will help ease some pressure, house prices may hold firm or even rise if demand picks up faster than supply can respond.
"For prospective buyers, it’s a tricky environment to navigate. Mortgage rates should continue drifting down, but affordability pressures and tax changes remain key hurdles. Seeking professional financial and mortgage advice will be crucial in securing the best possible deal in an unpredictable market."
