House price growth has softened as the annual rate of growth slowed to 4.1% in January, compared with 4.7% in December, Nationwide’s latest House Price Index has revealed.
According to the index, house prices rose by 0.1% month on month.
The average house price stood at £268,213 in January, little changed compared to £269,426 recorded in December.
Robert Gardner, chief economist at Nationwide, said: “The housing market continues to show resilience despite ongoing affordability pressures.
“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.
“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%.
“Furthermore, house prices remain high relative to average earnings, with the first-time buyer house price to earnings ratio standing at 5.0 at the end of 2024, still well above the long run average of 3.9.
“Consequently, the deposit hurdle remains high.”
He added: “This is a challenge that has been made worse by the record increase in rents in recent years, which, together with the cost-of-living crisis more generally, has hampered the ability of many in the private rented sector to save.
“Therefore, it’s not surprising that a significant proportion of first-time buyers have to draw on help from friends and family to raise a deposit.”
Reaction:
Amy Reynolds, head of sales at Richmond estate agency Antony Roberts:
“The first half of the month was a bit slow but it has turned out to be a busier January than normal.
“The Stamp Duty holiday has helped, with an increase in sales agreed in those chains where there is a first-time buyer keen to take advantage of the discount before the end of March.
“While this has been welcome, there is concern that [once] the Stamp Duty holiday ends, there will be a dip in activity and transactions.
“The value of a Stamp Duty incentive to first-time buyers is instant – it is real cash in their pockets, allowing someone to buy who otherwise might not be able to and this impacts those trying to move because they need a first-time buyer at the bottom of the chain in order for the second stepper to move on.
“It is the sale of larger homes that stimulates the economy and those higher value transactions brings in significant revenue.
“We would therefore urge the Government to reconsider and introduce much-needed further stamp duty concessions in the Spring statement.”
Mark Harris, chief executive of mortgage broker SPF Private Clients:
“Since the start of the year, mortgage pricing has not seen the consistent downwards trend that borrowers would like.
“However, if swap rates, which underpin the pricing of fixed-rate mortgages, continue to slide, it is hoped this will be passed onto borrowers in the form of cheaper mortgage rates in coming days and weeks.
“With the Bank of England expected to reduce interest rates next week, the outlook for borrowers is looking up.
“With some forecasters expecting a handful of rate reductions this year, it is encouraging news for those thinking of buying a property or refinancing.”
Nathan Emerson, CEO of Propertymark:
“Moving into 2025, it’s positive to see that house prices and mortgage lending remain resilient despite continued affordability pressures.
“Currently, it’s likely a lot of movement in the market is due to people wanting to push through with their purchases and sales before the Stamp Duty rises in England and Northern Ireland in April.
“However, one aspect helping maintain momentum in the marketplace is the fact that mortgage rates and financial pressures are slowly improving for those looking to make a move.
“Propertymark member agents have reported that new buyers registered per branch have on average increased year on year by 44%.”
Tomer Aboody, director of specialist lender MT Finance:
“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.
“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.”
Jeremy Leaf, North London estate agent and a former RICS residential chairman:
“Price growth is softening, partly in response to a new year bounce in supply but also as the impact of the spike in first-time buyer demand prompted by April’s withdrawal of the stamp duty concession falls away.
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“Looking forward, although wages have been outpacing inflation over recent times, which has helped to boost confidence, affordability concerns have never gone away.
“The market remains tight and little change is expected over the next few months at least, irrespective of any possible interest rate reductions.”
Karen Noye, mortgage expert at Quilter:
“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.
“This might bloat prices in weeks to come as people lock in deals in the hope, they can avoid higher taxes.
“Buyers just need to not let the tail wag the dog and end up paying over the odds for a property, ending up in a similar or worse position than if they had just bided their time and suffered a larger tax bill.
“For most, though, it is now too late, and people will struggle to get a house purchase through before the rule change.
“Given how much affordability is stretched for first-time buyers, this is yet another blow to those looking to get on the housing ladder.
“Recent announcements that there may be a removal of mortgage red tape with an aim to improve affordability for first-time buyers are welcome.
“High house prices, increased borrowing costs, and persistent inflation make saving for deposits a real struggle.
“Looking ahead, 2025 has a cautiously optimistic outlook, but there are still challenges.
“The Bank of England’s expected base rate cuts should gradually lower borrowing costs, which could support demand.
“Wage growth, along with these lower rates, might boost buyer sentiment in the coming months.
“However, 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.”
Jonathan Handford, managing director at national estate agent group Fine & Country:
“January is often a strong indicator of the year ahead in the property market, and this year’s performance so far paints a positive picture.
“Although growth slowed in January year-on-year, month-on-month prices rose slightly.
“Strengthening buyer confidence, supported by a more stable economic backdrop, continues to drive demand.
“Last year’s steadying inflation rates and the gradual reduction in interest rates helped to restore market sentiment, providing a solid foundation for growth in 2025.
“Another key factor driving activity is the anticipation of tax changes, particularly the adjustments to stamp duty thresholds set to take effect in April.
“This has encouraged buyers to act sooner rather than later to maximise potential savings.
“Other indicators also point to a strong start to the year. Zoopla recently reported that the market in early 2025 is outperforming both 2024 and 2023, with buyer demand up 13% year-on-year in January and 10% more homes available.
“While rising demand typically puts upward pressure on prices, greater housing supply could help temper excessive price increases, ensuring the market remains accessible.”
Jonathan Hopper, CEO of Garrington Property Finders:
“January’s cooling price inflation is a welcome sanity check for a market which built up a significant head of steam at the end of 2024.
“Let’s be clear, the reduction in the pace of price growth is modest. Average prices have risen 2% in just three months, and at 4.1% the annual rate of inflation is still higher than it was in every month of 2024 except December.
“There’s still plenty of demand in the market too. Estate agents rang in the New Year with a jump in buyer enquiries and the online property portals reported record search traffic over the Christmas period.
“Yesterday the Bank of England confirmed a surprise jump in the number of mortgages approved in December, and these will feed through into purchases in the coming weeks and months.
“Two factors are powering this momentum – the final weeks of the ‘Stamp Duty stampede’ as many first-time buyers race to complete their purchases before the Stamp Duty thresholds change at the end of March.
“The second is the feeling that cheaper mortgages are on their way. Next week the Bank of England is widely expected to reduce its Base Rate, and this will gradually reduce the cost of borrowing.
“Yet for all the momentum in the market, price rises are neither inevitable nor unquestioning.
“Buyers remain intensely price-sensitive, and the abundance of properties for sale means many won’t hesitate to walk away from homes they like but feel are overpriced.”
Article from The Intermediary - Jessica O'Connor
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