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UK house prices rose more than expected in December, helped by buyers rushing to close deals before stamp duty increases in April, according to Nationwide Bank.
Prices rose 0.7 per cent compared to November, higher than the 0.1 per cent increase economists had expected, taking the average house price to £269,426, just below the record high set in 2022.
Nationwide said home prices rose 4.7 percent in December from a year earlier, the fastest annual pace since October 2022 and exceeding economists' expectations of a 3.8 percent increase.
“Mortgage market activity and home prices proved surprisingly resilient in 2024 given the ongoing affordability challenges facing prospective buyers,” Robert Gardner, Nationwide's chief economist, said Thursday.
Nicky Stevenson, managing director at estate agents Fine & Country, said house prices “continued to defy expectations, with house prices continuing to rise despite the usual seasonal slowdown”.
“This reflects strong demand as buyers moved quickly to secure deals ahead of the stamp duty limit changes in April 2025,” he added.
Chancellor Rachel Reeves confirmed in the Budget that the temporary stamp duty holiday will end in March, leading many analysts to predict a rush in transactions in advance. From April, first-time buyers, for example, will start paying estate tax on estates worth £300,000 or more, instead of the current £425,000.
Mortgage rates rose in November after the budget, reflecting expectations that the Bank of England will cut borrowing costs more slowly than previously expected.
However, borrowing costs remain well below their peak last summer. The average two-year fixed rate at 60 per cent loan-to-value was 4.39 per cent in November, according to data from the Bank of England. This represents an increase from 4.21 per cent in October but well below the 6.22 per cent reached in July 2023.
“The nationwide house price index suggests the post-Budget boost from pent-up demand still has a little longer to go,” said Alex Kerr, economist at Capital Economics. “Remarkably, strengthening demand appears to have offset the recent rise in mortgage interest rates.”
House prices rose in all regions in the final quarter of 2024, with Northern Ireland recording the fastest annual pace of 7.1 per cent, according to Nationwide.
However, the bank reported that across England there was a “clear north-south split” in house price performance in 2024, with a 4.9 per cent rise in the north but just a 2.2 per cent rise in the south.
Gardner expects UK house prices to rise by between 2 per cent and 4 per cent in 2025.
He also expects housing market activity to gradually strengthen “as constraints on affordability are eased by a combination of modestly low interest rates and earnings outpacing house price growth.”
