But affordability pressures and stamp duty changes add uncertainty for buyers
UK house prices saw a 4.1% annual increase in January, marking a slight slowdown in growth compared to December, according to the latest data from Nationwide. On a monthly basis, prices edged up by 0.1% to £268,213.
“The housing market continues to show resilience despite ongoing affordability pressures,” said Robert Gardner (picture left), chief economist at Nationwide Building Society. “As we highlighted in our recent affordability report, while there has been a modest improvement over the last year, affordability remains stretched by historic standards.”
Gardner explained that a prospective buyer earning the average UK income and buying a typical first-time buyer property with a 20% deposit would have a monthly mortgage payment equivalent to 36% of their take-home pay – well above the long-run average of 30%.
He also pointed to the continued challenge of high house prices relative to earnings, with the first-time buyer house price-to-earnings ratio standing at 5.0 at the end of 2024, compared to the long-run average of 3.9. Rising rents and the cost-of-living crisis have further hindered the ability of renters to save for a deposit.
The economist noted that an increasing share of first-time buyers depend on financial support from family or friends, with about 40% receiving help to raise a deposit in 2023/24, either through a gift, loan, or inheritance.
Despite affordability challenges, homeownership levels have remained stable. Data from the Ministry of Housing, Communities & Local Government (MHCLG) showed that in 2024, the homeownership rate in England stood at 65%. More than half of homeowners (55%) owned their properties outright, reflecting demographic trends. Meanwhile, the proportion of households in the private rented sector remained unchanged at 19%.
Homeownership rates among younger buyers have improved slightly over the past decade but remain below historic peaks. Among those aged 25 to 34, ownership rose to 45% in 2024, up from 36% in 2014, though still below the 59% peak recorded in 2004.
The number of outright homeowners has also increased, with 1.3 million more households owning their homes mortgage-free over the past decade.
Karen Noye (pictured centre), mortgage expert at Quilter, said the housing market’s steady demand had been supported by strong employment levels, easing inflation, and improved mortgage rates. She, however, agreed that affordability remains a key issue.
“Many first-time buyers have, in recent weeks, been scrambling to get their property sales motoring ahead of the stamp duty rules changing in April,” she said. “This might bloat prices in weeks to come as people lock in deals in the hope they can avoid higher taxes.
“The difficulties for first-time buyers have a knock-on effect across the housing market. Without them, the market risks becoming ‘glued up’, with chains stalling and transactions slowing down.”
Looking ahead, Noye said the market remains cautiously optimistic. Expected interest rate cuts from the Bank of England could help lower borrowing costs, potentially boosting buyer confidence. Wage growth may also improve affordability.
“Targeted measures to help first-time buyers will be crucial to reigniting activity at the lower end of the market, which continues to be blighted by affordability concerns,” she said.
Tomer Aboody (pictured right), director at MT Finance, echoed concerns about affordability pressures despite Nationwide’s figures indicating market stability.
“With Nationwide’s numbers further indicating a confident market, actual growth in prices is very minimal as buyers face a challenging period due to affordability,” he said. “Although rates remain reasonable, many in the market were hoping for a further cut by now, and are hopeful it won’t be long before we get one.
“More flexibility is needed from lenders in order to help buyers onto the ladder, and many are questioning whether the Chancellor’s growth message is realistic as little help has been evident so far.”
Any thoughts on the latest Nationwide House Price Index? Share them with us by leaving a comment in the discussion box at the bottom of the page.
