"As things stand, mortgage rates are likely to hover between 4% and 5% in 2025, influenced by both global financial markets and domestic monetary policy. "
- Amanda Bryden, head of mortgages at Halifax
The housing market saw a strong start to 2025 with house prices rising to hit new record high, according to the latest Halifax house price index.
House prices increased by 0.7% in January, following a fall of 0.2% in December, pushing the average property price to a new all-time high of £299,138.
Despite this, annual growth eased to 3.0%, down from 3.4% the previous month, to the slowest rate since July.
In addition, the rate of annual property price inflation slowed in two thirds of the UK’s nations and regions at the start of the year.
Northern Ireland continues to have the strongest annual property annual price growth in the UK, though at 5.9% in January this eased considerably compared to December's 7.3%.
House prices in Wales were up 3.6% compared to the previous year and Scotland once again saw a lower rise in house prices compared to the rest of the UK, with growth of 2.4%.
In England, the North East has overtaken the North West as the region with the strongest annual property price growth, up 5.2% compared to the previous year. This is the first time since September 2023 that the North West has not topped the table of English regions for annual growth.
London retains the highest average house price in the UK, at £548,288, up 2.8% compared to last year.
Amanda Bryden, head of mortgages at Halifax, said: "The UK housing market started the year on a positive note, with average prices rising by 0.7% in January, more than recovering the slight dip of -0.2% in December. This increase pushed the average property price to a new record high of £299,138. However, annual growth slowed to 3.0%, the slowest rate since last July.
"Affordability is still a challenge for many would-be buyers, but the market's resilience is noteworthy. There’s strong demand for new mortgages and growth in lending. 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.
"Despite geopolitical uncertainties, and waning consumer confidence, other key indicators look fairly positive for the housing market. The Bank of England has made its first base rate cut of the year, and there are probably more to come. Household earnings are expected to continue outpacing inflation – albeit that gap may narrow – easing some of the financial pressure still being felt from the cost-of-living squeeze.
"As things stand, mortgage rates are likely to hover between 4% and 5% in 2025, influenced by both global financial markets and domestic monetary policy. Over the past year, buyers have been getting used to this new normal, understanding that rates are unlikely to return to the historical lows of 1%.
"But the fundamental issue in the housing market remains the lack of supply. This long-term trend, coupled with a gradual improvement in affordability, should support further modest house price growth this year."
Jonathan Hopper, CEO of Garrington Property Finders, commented: “The traditional January bounce didn’t disappoint. After several property portals reported record Boxing Day traffic and a surprise jump in the number of mortgages approved in December, business was brisk in much of the property market last month.
“But the eye-catching jump in prices that Halifax recorded at a national level is deceptive. Look more closely at the data and it becomes clear that accelerating price growth is far from universal - in fact it slowed in two-thirds of the UK’s nations and regions.
“The north-south divide is getting bigger as northern regions, where value is perceived as better, post some increasingly punchy numbers. Prices in the North East grew 5.2% in the past year, nearly twice as fast as prices rose in London.
“Even more striking is the price divide. If the mainstream market is going like a train, the prime market is going like a glacier.
“Price growth has slowed to a crawl, or is flat, in some of Britain’s most expensive and desirable locations. Two factors lie behind this - an abundance of homes for sale, and the intensely price-sensitive approach being taken by buyers.
“While at the bottom end of the market, some first-time buyers have been viewing in haste and offering high in order to do a deal quickly in an effort to beat next month’s Stamp Duty deadline, at the top end of the market it’s the opposite.
“With the supply of prime homes for sale outstripping demand, wealthy buyers find themselves spoilt for choice and able to negotiate hard on price.
“Yesterday’s reduction in the Bank of England Base Rate will reduce the cost of borrowing and give buyers the freedom to stretch their budget if they want, but at present price inflation is centred on northern England and Wales.
"Elsewhere, the price rises are much more modest and sellers need to price their homes carefully or risk seeing them stuck unsold on the shelf.”
David Johnson, managing director of property consultancy INHOUS, added: “January’s property market was driven by two buyer demographics in particular. First-time buyers rushing to beat the looming changes to Stamp Duty thresholds and, on the other spectrum of the market, high-net-worth-individuals and property investors who revaluated the UK property market following Rachel Reeve’s plans to soften her previously announced non-dom tax changes. The heightened demand has contributed to more competitive market conditions for house hunters and the majority of properties holding their value, however, buyers should not shy away from entering price negotiations.”
