Average UK house prices increased by 4.9% in the 12 months to January, up from 4.6% in the 12 months to December 2024, according to the latest UK House Price Index from the ONS.
Average house prices increased by 4.8%, 6.0% in Wales, 4.6% in Scotland, and 9.0% in Northern Ireland.
The North East was the English region with the highest house price inflation in the 12 months to January, at 9.1%, up from 6.9% in the 12 months to December.
Annual house price inflation was lowest in London, at 2.3%, but up from 0.4% in the 12 months to December.
Richard Harrison, head of mortgages at Atom Bank, commented: “The increase reported by the ONS - the highest rate of annual growth since February 2023 - is a great snapshot of the start of this year, with buyers moving quickly out of the blocks in the race to beat the upcoming stamp duty deadline. This is borne out by figures from Rightmove, showing that the level of agreed deals is up by 9% on the same point last year. Even if the passing of the stamp duty deadline leads to a material drop in demand, the underlying lack of supply means prices are unlikely to drop at all over the coming months.
“Cheaper mortgage rates are playing their part, too. Moneyfacts reported significant momentum in rate falls across February, with two and five-year fixes dropping at the fastest pace in six months. With inflation coming in lower than expected, and the markets now predicting there will be two further base rate cuts this year - potentially from as soon as May - the prospect of mortgage rates heading below 4% will buoy buyers.
“However, if lenders are to meet that demand, they will have to be flexible with borrowers who fall outside the Prime category. The challenges of the last few years mean increased numbers of would-be buyers have less than spotless credit records, yet are more than capable of meeting the monthly mortgage repayments. It’s vital that they have access to competitive mortgages, and at high LTVs, if we are to have a housing ladder that functions properly.”
Tim Parkes, CEO of RAW Capital Partners, said: “House prices continue to report positive annual growth, and this very much aligns with the market sentiment we are witnessing on the ground. Momentum built towards the end of last year, and activity levels have surged in early 2025. Despite next week’s changes to stamp duty thresholds, there's still optimism that the market will continue perform well throughout the spring and summer months.
“Largely, this confidence stems from the Bank of England’s rate cutting cycle. While rates were held at last week's meeting, markets anticipate at least two cuts before the year’s end, potentially bringing the base rate down to 4.0%. The economic data the Chancellor will be revealing later today from the Office for Budget Responsibility (OBR) – announced alongside the Spring Statement – will provide some important clues as to whether the Bank has the scope to proceed with these cuts.
“Regardless of what decision comes next, the sector is actively finding ways to facilitate investment, and today’s positive house price data should provide further encouragement. Lenders and brokers must now work together to ensure investors can access the finance they need to sustain this momentum into Q2 and beyond.”
