Modest growth expected next year
The UK housing market outperformed expectations in 2024, buoyed by lower mortgage rates and robust wage growth, according to the latest market review by Halifax.
Property prices reached a record average high of £298,083 following annual growth of 4.8%. Transaction volumes also returned to pre-pandemic levels.
Despite signs of recovery, affordability challenges persist for many buyers, with interest rate declines expected to be gradual, particularly affecting homeowners refinancing older fixed rate deals. Halifax forecasts modest house price growth of 0% to 3% in 2025, alongside a slight rise in transaction volumes.
Amanda Bryden (pictured), head of mortgages at Halifax, attributed the 2024 recovery to two main factors: lower mortgage rates and improving household earnings.
“Mortgage rates fell significantly, at times as much as 160 basis points below the peaks of 2022 and 2023,” said Bryden. “Additionally, income growth is catching up with past inflation, easing financial pressure on buyers. For new mortgages, monthly payments as a percentage of earnings dropped from 33% to 29% over the last year.”
The improved financial conditions boosted buyer confidence, with mortgage demand hitting its highest level in over two years. This resurgence brought transaction volumes back in line with pre-pandemic averages, recovering from a 20% lag earlier in the year.
However, Bryden noted that supply-side constraints continued to prop up prices. Limited availability of homes for sale, partly due to homeowners hesitating to sell to avoid higher monthly mortgage costs, and a slowdown in new-build completions have contributed to the imbalance.
Looking ahead, Halifax predicts a slower pace of growth for 2025, citing lingering affordability issues. Bryden emphasised that while Bank of England rate cuts are anticipated, they are expected to occur more gradually than previously forecast. Homeowners with expiring fixed-rate mortgages may face significant cost increases when refinancing.
Despite these challenges, the outlook for buyer demand remains positive, underpinned by stable employment conditions.
“We expect modest house price growth in 2025, likely a little lower than this year, at up to 3%, along with a small increase in the number of transactions,” Bryden concluded.
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