Homes in the UK have never been more expensive, with prices driven to record highs in recent weeks by first-time buyers trying to get ahead of looming changes to stamp duty.
House prices rose by 0.7 per cent in January, according to Halifax, one of Britain’s largest mortgage lenders. The increase followed a dip in December, which was the first monthly price fall recorded since last March.
Halifax estimates that the average house price across the country now stands at £299,138, up from £297,179 in December and almost £6,000 more than what was seen in the summer of 2022, when the housing market’s post-lockdown boom peaked.
Compared with 12 months ago, house prices are 3 per cent higher, although the annual rate of inflation has fallen each month since November, when it reached 4.7 per cent.
Last week Nationwide’s data suggested that house price growth had slowed to 0.1 per cent in January. Owing to differences in their calculation methods, Nationwide’s index is typically smoother than Halifax’s, which is more reactive to changes in the housing market.
From April, first-time buyers will have to pay stamp duty on any part of their purchase price above £300,000. Currently, the tax-free threshold is set at £425,000. That change, especially in dearer parts of the country such as London and the south, could end up costing first-timers thousands of pounds.
To try to avoid that, estate agents, housebuilders and lenders have all reported a flurry of activity in recent weeks.
• Why 2025 will be a good year for the property market
“There’s strong demand for new mortgages and growth in lending,” Amanda Bryden, head of mortgages at Halifax, said. “With a stamp duty increase looming, some of this demand may have come from first-time buyers eager to complete transactions before the end of March.”
Looking ahead, Halifax thinks mortgage rates are likely to hover between 4 per cent and 5 per cent throughout 2025, influenced by global financial markets and domestic monetary policy.
January’s house price increase was stronger than the 0.2 per cent month-on-month increase that economists had been expecting. “[The] rebound in Halifax house prices in January suggests the housing market continues to gather momentum as the wider economy is losing it,” Ashley Webb, senior economist at Capital Economics, said.
In all parts of the UK, house prices are higher than they were this time last year. Northern Ireland remains the nation’s property hotspot, with prices there up 5.9 per cent over the past 12 months. In Scotland, where prices are growing slowest, the annual rate of inflation is still 2.4 per cent. In England, the northeast is now the region with the strongest annual property price growth, up 5.2 per cent compared with last January. It is the first time since September 2023 that the northwest has not topped the table of English regions.
“Despite geopolitical uncertainties, and waning consumer confidence, other key indicators look fairly positive for the housing market,” Bryden said, noting the latest interest rate cut from the Bank of England this week and the expectation that wage growth will continue to outpace inflation.
“But the fundamental issue in the housing market remains the lack of supply,” she added. “This long-term trend, coupled with a gradual improvement in affordability, should support further modest house price growth this year.”
Webb expects prices will rise even faster, partly because he thinks interest rates will be reduced more quickly than most are predicting. He is forecasting a 4.5 per cent rise in house prices this year.