House price development across the country experiences a deceleration, although it stays robust overall.
House prices persist in a positive trend during the first month of the year, despite persistent affordability concerns. Compared to this time last year, prices have jumped by 4.1%, according to Nationwide's House Price Index, with a negligible monthly increase of 0.1%.
Though house price affordability has experienced a slight improvement over the past year due to wages outpacing house price inflation, many potential buyers are still struggling to make ends meet.
The average first-time buyer is typically paying 36% of their take-home pay towards their mortgage, significantly over the long-run average of 30%. To secure their dream home, buyers must boast above-average salaries, ample savings, or parental assistance, as the average first home now costs five times a buyer's earnings.
Mortgage rates remain elevated, with the average two-year fixed-rate standing at 5.52%, slightly decreasing to 5.32% on a five-year deal.
Upcoming months may witness continued house price growth, with buyers rushing to complete transactions before the March 31st stamp duty deadline. After this date, the stamp duty threshold will fall from £250,000 to £125,000 for standard buyers and from £425,000 to £300,000 for first-time buyers.
The Bank of England could provide another boost to buyer confidence with a third anticipated interest rate reduction next week, easing affordability levels further.
Affordability levels remain stretched by historical standards, but government proposals to loosen lending rules may offer some relief for first-time buyers and those looking to upgrade or refinance. However, Experts predict a bifurcated year for the housing market, with a decline in home sales after the stamp duty changes implementation.
New data from Zoopla reveals that buyer demand is 13% higher than last year, with 10% more homes available for sale and 12% more sales agreed. The typical estate agency branch now manages 31 homes on its books, the highest January total for seven years.
Sellers should pay close attention to market dynamics and adjust their pricing strategies accordingly to attract potential buyers. On the flip side, prospective buyers may be hesitant to invest due to the fluctuations in interest rates. They'll need to weigh the potential savings against the potential rise in house prices.
Renters, in the meantime, are setting new records for monthly rents, hampering their ability to save for a down payment or deposit. Familial assistance or government-backed schemes, such as Lifetime ISAs, may provide alternative avenues for buyers to secure their dream homes.
Footnotes:
[1] See Nationwide's House Price Index for more details: https://www.nationwide.co.uk/news-and-insight/house-price-index
[2] Read more on Knight Frank's revised house price forecast: https://www.knightfrank.com/research/market-data/residential/global-housing-market-outlook-april-2025
[5] Examine Glendale Associates' 5-year housing market projections: https://glendaleassociates.co.uk/knowledge-bank/2025-UK-housing-market-forecast/
- In the current personal finance landscape, potential first-time buyers face challenges in affording a home, as average buyers pay 36% of their take-home pay towards their mortgage – significantly higher than the long-run average of 30%.
- Interest rates for mortgages remain elevated, with the average two-year fixed-rate standing at 5.52%, and the average five-year deal at 5.32%. This could make investing in real-estate – particularly in the current housing market – less financially viable for many.
- With the upcoming March 31st stamp duty deadline and the subsequent decrease in thresholds for standard buyers and first-time buyers, some experts predict a bifurcated year for the housing market, with a decline in home sales expected after the implementation.
- For renters looking to save for a down payment or deposit, the steady increase in monthly rents poses a challenge, but government-backed schemes like Lifetime ISAs and familial assistance can help potential buyers navigate the personal-finance expectations of the housing market.
