The UK housing market starts the new year with a bang, says Rightmove | housing market

The report says 2025 is set to be an even busier year, with a record number of new sellers entering the UK housing market since Boxing Day, while average prices and the number of agreed sales have also increased.

Real estate website Rightmove said in its monthly report that the average price of properties coming on the market this month rose 1.7% (5,992) to 366,189, the biggest year-to-date price increase since 2020. Prices typically rebound in the new year after a seasonal decline in December, but the rise was evident this month before Christmas.

Buyers are understood to be more comfortable bidding on homes in response to falling interest rates. Interest rates could fall steeper this year after official figures showed inflation fell more than expected to 2.5% in November.

However, the price is still nearly 9,000 below the all-time high set in May 2024. This reflects affordability constraints for some buyers.

The number of new properties coming to the market is up 11% on a year ago, the number of buyers contacting agents about properties for sale since Boxing Day is 9% ahead of last year and the number of agreed sales is up 11% over the same period.

The average number of homes listed across all estate agency branches is at its highest for this time of year in 10 years, with sellers competing to attract buyers in the new year. Some sellers may be too optimistic about the initial price, which could result in them being left on the shelf, Rightmove said.

Colleen Babcock, property expert at Rightmove, said new sellers have had a great start to the year. We've also seen a strong start to the year in terms of new sellers asking prices, but given higher-than-expected seller competition, we expect this competition to slow in the coming months.

Graph showing monthly price changes over the last 12 months

The company expects more transactions this year, at 1.15 million, and expects the average asking price to increase by 4%.

However, there is uncertainty ahead, with the pace and number of rate cuts by the Bank of England and stamp duty changes on April 1 affecting smaller homes typically bought by first-time buyers.

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First-time buyers in cheaper parts of the UK will not be significantly affected when the duty-free limit drops to 300,000 from April. But unless further support for first-time buyers is announced soon, rising stamp duty charges for those buying above the threshold will be a drag in more expensive areas, Rightmove said.

Mortgage rates have remained relatively high as fixed rate deals below 4% have all but disappeared in recent months. Rightmoves' weekly mortgage tracker shows the average five-year fixed mortgage rate is currently 4.75%, little changed from 4.78% at this time last year. The average two-year fixed mortgage interest rate has improved, but is still 4.97%, slightly down from 5.08% last year.

After a surprise drop in UK inflation in December and weak economic growth in November, interest rate expectations in financial markets have shifted and financial markets are now pricing in a point cut in the second and third quarters of this year. A sell-off in UK and other government bonds 10 days ago sent yields, in effect interest rates, sharply higher, but this rise was reversed during a rollercoaster week.

Tom Bill, head of UK residential research at estate agent Knight Frank, said: “Demand is likely to remain under pressure in the coming months due to the impact of rising borrowing costs on mortgage lending. In addition to the pace of interest rate cuts by the Bank of England, what happens in bond markets during the first few weeks of Donald Trump's presidency is likely to affect the future of mortgage lending. It will have a fairly direct impact on UK house prices.

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