The UK housing market has shown resilience, closing the year 2024 with a 4.7% increase in house prices compared to the beginning of the year, according to recent data from Nationwide, the UK's largest building society. The average home price at the end of December reached £269,426, reflecting a diverse landscape of buyer activity and financial pressures.
A significant factor in this market dynamic is the prevalence of cash buyers, who now account for approximately one-third of all housing sales. This trend has been pivotal as many potential buyers grapple with rising mortgage rates and overall affordability. Currently, about 4.4 million mortgage holders are expected to experience increased payments by 2027, placing additional strain on household finances.
The interest rate landscape remains a crucial consideration for buyers. Fixed-rate mortgages maintain their interest rates until the deal expires, typically after two or five years. Most mortgage customers—approximately eight in ten—are on fixed-rate deals. However, for those approaching the end of their terms, financial adjustments will be necessary. A typical owner-occupier moving off a fixed rate within the next two years could see their monthly repayments rise by around £146.
As the housing market anticipates changes in stamp duty scheduled for April 2025, experts predict an uptick in sales activity in the coming months. The new regulations will require house buyers in England and Northern Ireland to start paying stamp duty on properties over £125,000, a significant drop from the current threshold of £250,000. For first-time buyers, the exemption limit will reduce from £425,000 to £300,000.
Holly Tomlinson, a financial planner at investment firm Quilter, commented on these impending changes, highlighting the challenges they pose for first-time buyers.
"The looming changes to stamp duty are likely to make purchasing even more difficult for first-time buyers, adding further costs at a time when every penny counts."
In addition to these shifts in taxation, housing experts have noted that rental growth has reached record levels in recent years. Robert Gardner, Nationwide's chief economist, explained how this situation has affected potential buyers' savings and purchasing power.
"This is a challenge that had been made worse by record rates of rental growth in recent years, which has hampered the ability of many in the private rented sector to save."
Regional disparities continue to influence market activity as well. Northern Ireland has exhibited the fastest price growth, with northern England also outpacing southern regions in value increases. Notably, terraced homes experienced the most rapid price appreciation throughout the year.
While house prices have risen over the past year, they remain below their peak levels observed in the summer of 2022. This reality offers some hope for prospective buyers navigating a challenging economic landscape.
Looking ahead, UK Finance has forecasted a 10% rise in mortgage lending for house purchases during 2025. Additionally, there are widespread expectations that the Bank of England will gradually reduce interest rates throughout the year, potentially starting as early as February.