UK house prices rise more than expected in December

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UK house prices rose more than expected in December as buyers rushed to complete deals ahead of a stamp duty hike in April, according to lender Nationwide.

Prices rose 0.7% compared to November, better than the 0.1% rise economists had expected, and the average home price was $269,426, slightly below the 2022 all-time high.

Home prices rose 4.7% in December compared to the same period last year, according to Nationwide, the fastest annual increase since October 2022 and surpassing the 3.8% rise economists had expected.

Nationwides chief economist Robert Gardner said Thursday that mortgage market activity and home prices have proven surprisingly resilient in 2024, given the affordability issues facing prospective buyers.

Nicky Stevenson, managing director of estate agent group Fine & Country, said house prices continued to fall short of expectations and despite the usual seasonal downturn, house prices were continuing to rise.

This reflects strong demand as buyers move quickly to secure deals ahead of changes to stamp duty standards in April 2025, he added.

Chancellor Rachel Reeves confirmed in her Budget that the temporary stamp duty holiday would end in March, which many analysts had predicted beforehand would lead to a surge in transactions. For example, from April first-time buyers will start paying levies on properties worth over 300,000, rather than the current 425,000.

Mortgage rates rose in November after the Budget, reflecting expectations that the Bank of England will lower borrowing costs more slowly than previously expected.

However, borrowing costs remain much lower than their peak last summer. The average two-year fixed rate (60% loan-to-value) was 4.39% in November, according to data from the Bank of England. This is up from 4.21% in October, but much lower than 6.22% in July 2023.

The National House Price Index suggests pent-up demand has picked up after a little more of the budget has been implemented, said Alex Kerr, economist at Capital Economics. It is worth noting that the recent rise in mortgage interest rates appears to have been offset by increased demand.

According to Nationwide, house prices rose across all regions in the fourth quarter of 2024, with Northern Ireland rising at the fastest rate at 7.1% per year.

However, the lender reported that across England there was a clear north-south gap in house price performance in 2024, with a 4.9% increase in the North but only a 2.2% rise in the South.

Gardner predicts that UK house prices will rise by 2-4% in 2025.

He also predicted that housing market activity will gradually strengthen as affordability constraints are eased through a combination of low interest rates and returns outpacing home price growth.

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