Nationwide’s latest figures show house prices edged up by 0.1% in January. While the annual growth rate eased to 4.1% by year-end, the market still outperformed expectations for 2024, despite mortgage rates continuing to challenge affordability.
Property sales also showed improvement, with 1.1 million transactions recorded last year. Although this figure sits 8% below the average between 2017 and 2019, it’s still an 8% increase compared to 2023. Activity gained momentum during the latter part of 2024, with a noticeable surge leading up to the October Budget. Another increase is likely in March as buyers aim to complete purchases before changes to Stamp Duty. Early signs from TwentyCI suggest more sales are being agreed, supporting this prediction. Zoopla reports that 2025 has begun on stronger footing than the past two years, with both supply and demand holding at high levels.
Financial markets made headlines in January after gilt yields briefly soared to levels not seen since the 2008 financial crisis. This spike led to concerns over potential mortgage rate hikes. Despite these jitters, mortgage rates stayed steady, and gilt yields settled back down to 4.5% by the end of the month – where they had started. While the market avoided any immediate disruption, the incident served as a reminder of its sensitivity to external events.
Looking ahead, mortgage rates are expected to move lower. The Bank of England’s recent cut of the base rate to 4.5% reflects growing concern over the sluggish economy and an effort by the Monetary Policy Committee to stimulate growth. This shift should encourage lenders to reduce borrowing costs, making homeownership more attainable. Analysts at Oxford Economics anticipate three more base rate cuts throughout 2025, which could see the rate drop to 3.75% by year-end.
Easing rules around mortgage lending is also under discussion. The Financial Conduct Authority has been asked to consider loosening current regulations, such as raising the loan-to-income threshold and adjusting stress testing requirements. Supporters believe this could help more people get on the property ladder. However, critics caution that loosening standards could inflate prices further and potentially lead to more households struggling if interest rates climb unexpectedly.
Scotland remains the strongest performer for house price growth. According to price-paid data up to October, West Dunbartonshire led with an increase of 8.7%, followed by Inverclyde at 8.0% and Moray at 7.0%. Elsewhere, the picture was mixed. Over a third of local authorities experienced price declines. Devon saw the largest falls, with property values in Torridge down 6.3%, North Devon dropping 4.7%, and Torbay falling by 4.3%.
Reference: Savills
