The annual rate of house price growth has remained broadly stable in February at 3.9%, compared with 4.1% in January, according to the latest Nationwide house price index.
The figures show that prices rose 0.4% month-on-month, with the average UK house price now £270,493.
Looking ahead, Nationwide predicts that the changes to stamp duty at the start of April will lead to a jump in transactions in March, and a corresponding period of weakness in the following months.
Robert Gardner, Nationwide's chief economist, said: “The price of a typical UK home rose by 3.9% year on year in February, similar to the annual pace of growth seen in January. House prices increased by 0.4% month on month, after taking account of seasonal effects - the sixth consecutive monthly gain.
“Housing market activity has also remained resilient in recent months, despite ongoing affordability challenges. Indeed, the second half of 2024 saw a noticeable pick up in total housing transactions, which were up 14% compared with the same period in 2023.
However, taking 2024 as a whole, transactions were still modestly (6%) lower than the levels prevailing before the pandemic struck in 2019.
“In terms of the pattern of transactions, it is notable that first-time buyer activity continued to recover, with mortgage completions in 2024 just 5% below 2019 levels. This represents a solid performance, given the interest rate environment – for example, five-year fixed mortgage rates are currently around 4.4% (for borrowers with a 25% deposit) compared to c2% in 2019.
“Cash transactions remained particularly robust, with activity 2% above pre-pandemic levels.
“The last 12 months have seen a gradual increase in the number of buy-to-let purchases involving a mortgage, with rental increases and an easing in buy-to-let mortgage rates improving the ability to raise finance. Nonetheless, activity remains quite subdued compared to historic levels.
“However, it is important to note that some cash purchases are also undertaken by landlords and that activity in this space appears to have remained more buoyant. However, higher transaction costs, as a result of recent and upcoming stamp duty changes and uncertainty relating to the regulatory environment, also appear to be having a cooling effect on this segment of the market.
“Looking ahead, the changes to stamp duty at the start of April are likely to generate volatility in transactions in the near term, as buyers bring forward their purchases to avoid the additional tax. This will likely lead to a jump in transactions in March, and a corresponding period of weakness in the following months, as occurred in the wake of previous stamp duty changes.”
Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, commented: “UK property prices continued to tick upwards in February, with a monthly uplift of 0.4% though the pace of annual growth slowed slightly to 3.9% from 4.1%. The resilience in the housing market came despite worries about the health of the wider economy as the country braces for the fallout from the triple hit to businesses from rising National Insurance, business rates and the minimum wage first announced in the Autumn Budget and set to come into force in April.
“The impending changes to stamp duty land tax thresholds, which take effect from April 1, helped to drive housing market activity in February. The Government’s decision not to extend the temporary increases to the thresholds - first put in place in September 2022 by the previous Government - beyond March, has encouraged buyers to rush through deals in a bid to secure a lower tax bill while they can.
“Easing mortgage rates, with more sub 4% deals back on the table, are another factor propelling the market – a result of three interest rate cuts since August last year and expectations of more to come in 2025. While affordability conditions are improving slowly, sticky inflation remains a concern as it raises the risk that the Bank of England keeps interest rates elevated for longer. Another worry is the UK’s stagnating economy amid repeated warnings from businesses that rising employment costs will not only prove inflationary but could also result in job cuts and hiring and salary freezes as companies battle to keep costs down.
"While property prices are expected to remain resilient in the first quarter, partly a reflection of base rate cuts and the stamp duty deadline, it will be interesting to see whether that momentum continues beyond April when the property tax thresholds revert back to their previous, lower levels.
“Affordability levels may be improving, albeit very slightly, but they remain severely stretched by historical standards. Mix that in with property tax increases, rising living costs from April when household bills jump up once again, job uncertainty and the potential for wage growth to slow and some sellers may be compelled to adjust asking prices downwards to secure a sale.”
Jonathan Handford, managing director at national estate agent group Fine & Country, added: “House price growth crept upward in February, but this looks like being the calm before the storm with stamp duty changes on the horizon.
“Many buyers — especially first-time purchasers and landlords — are rushing to secure deals before the tax increase takes effect. For those entering the property market, the looming rise in upfront costs makes the current window crucial. Locking in a purchase now could mean significant savings, particularly for those stretching their budgets to afford a home.
“Adding fuel to the fire, the Bank of England’s decision to cut the base rate to 4.5% in February — which should also translate into lower mortgage rates — has made borrowing cheaper, injecting momentum into early 2025.
“This urgency is evident in the £848 million paid in stamp duty in January, a £40 million rise from the previous year, according to HMRC data. Meanwhile, Zoopla’s latest House Price Index shows the number of sales agreed was 10% higher in January, and the number of homes for sale was up 11% compared to a year ago.
‘But rising house prices aren't good news for everyone. While the market is active, the affordability gap continues to widen. Higher house prices, driven by increased demand and lower mortgage rates, mean many buyers could struggle to find homes within their budget, despite lower borrowing costs.
“Economic headwinds could also complicate the picture. CPI inflation has ticked back up to 3%, potentially delaying further interest rate cuts and keeping household budgets under pressure. While lower rates are a win for borrowers, persistent inflation could force the Bank of England to pause or slow future reductions, limiting affordability improvements in the long run.
“With a heated market, looming tax changes, and economic uncertainty, the coming months will be crucial. If borrowing costs remain favourable and inflation stabilises, buyer confidence could hold steady — but if affordability worsens, the housing market may face fresh challenges as 2025 unfolds.”
