UK House Prices Climbed 4.7% in 2024

The UK housing market ended 2024 on a strong note with house prices soaring more than expected in December. The nation saw a 0.7% increase in prices compared with November, surpassing economists' expectations of a 0.1% increase.

Meanwhile, annual price growth hit 4.7% in December, the fastest pace since October 2022. Analysts had predicted a 3.8% increase, but strong demand and the looming stamp duty deadline seem to have fuelled a busier-than-expected market.

Why Are House Prices Rising?

Buyers are hurrying to close deals before the stamp duty holiday ends in March 2025, driving the house price surge. Chancellor Rachel Reeves announced in the Autumn Budget that the threshold for first-time buyers will fall from £425,000 to £300,000. This has prompted many to expedite their purchases.

No surprise then that demand has remained stable even during the typically slow holiday season. Buyers are acting quickly to close deals before the April stamp duty changes.

What Is the Outlook of Mortgage Rates?

The housing market's resilience is at odds with uncertain mortgage costs. After the Budget announcement, the average rate for two-year fixed mortgages with a 60% loan-to-value rose to 4.39% in November from 4.21% in October. However, that is much lower than the peak of 6.22% in July 2023. 

Some lenders believe that lower mortgage rates and higher wages could make homes more affordable this year. UK Finance, the trade body for lenders, predicts a 10% increase in mortgage lending for home purchases in 2025. However, some experts are sceptical, calling the outlook overly optimistic.

Currently, 80% of mortgage holders are on fixed-rate deals, meaning their interest rates won't change until their current term ends, and they switch to a new deal.

Even if mortgage rates drop this year, they'll likely remain higher than the rates many homeowners are locked into now.

The Bank of England estimates that by 2027, about 4.4 million mortgage holders will see their payments hike. Homeowners coming off fixed-rate deals in the next two years could see their monthly payments climb by an average of £146.

What's Ahead for 2025?

Experts expect house prices to grow by 2% to 4% in 2025, supported by gradually improving affordability.

Lower mortgage rates and earnings outpacing house price growth are expected to ease constraints, fostering a recovery in market activity.

Conclusion

Experts say the housing market has stayed buoyant despite affordability slipping out of reach for many prospective buyers thanks to the April stamp duty changes, which have forced buyers to close deals before the holiday ends in March 2025.