The UK housing market showed remarkable resilience in 2024, with house prices increasing by 4.7%. According to Nationwide, the average home price reached £269,426 by December. Although house prices remain below the peak seen in summer 2022, terraced homes experienced the fastest growth in value, indicating a shift in housing demand. Despite ongoing affordability concerns, the market remained resilient, particularly in the latter half of the year.
Regional Price Growth: Northern Ireland and Northern England Lead
Regions such as Northern Ireland and northern England outperformed the south in terms of house price growth. This regional disparity reflects an ongoing trend where demand is shifting away from traditionally high-priced southern markets. Northern areas have seen stronger price growth, especially in comparison to the more expensive south.
Challenges for 2025: Mortgage Rates and Stamp Duty Changes
Looking ahead to 2025, experts predict some turbulence in the housing market due to uncertainties around mortgage rates and expected changes to stamp duty. In April, the stamp duty thresholds will decrease, meaning buyers in England and Northern Ireland will pay stamp duty on properties worth over £125,000, down from the current £250,000 threshold. Additionally, first-time buyers will face stricter limits, with the exemption threshold dropping from £425,000 to £300,000.
Experts foresee a potential surge in property transactions before these changes take effect, followed by a slowdown afterward. Falling interest rates, expected as early as February, may alleviate some pressure on buyers by lowering fixed mortgage costs, although economic uncertainty remains a concern.
Affordability Challenges for First-Time Buyers
Affordability remains a significant barrier for first-time buyers, with high house prices and rising rents making it harder for individuals to save for a deposit. Robert Gardner, Nationwide’s chief economist, emphasized that these affordability issues are key obstacles for many prospective homeowners. Financial planner Holly Tomlinson also warned that stamp duty changes would add extra costs for first-time buyers, further complicating their path to homeownership.
UK Finance predicts a 10% rise in mortgage lending for purchases in 2025, though some analysts believe this may be overly optimistic due to persistent affordability challenges.
The Impact of Rising Mortgage Costs
While interest rates are expected to fall, homeowners locked into fixed-rate deals may face higher monthly payments once their deals expire. According to the Bank of England, an estimated 4.4 million mortgage holders will experience increased payments by 2027. A typical owner-occupier could see their monthly payment rise by an average of £146 when switching to a new deal, adding further financial strain.
Nationwide’s data shows that affordability challenges are expected to persist, with many households facing a difficult housing market in 2025. The housing market’s resilience in 2024 was evident, with notable price increases in various regions, particularly in the north and Northern Ireland. However, challenges remain as the market braces for potential shifts in the coming year.
For those considering purchasing a home or navigating the housing market, an Clever Fox Budget Planner notebook that can help track budgets, savings goals, and mortgage calculations. This planner is a valuable tool for anyone looking to stay organized while managing their finances during this unpredictable housing market.
