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UK house prices rose more than expected in December, supported by buyers rushing to complete deals ahead of a stamp duty hike in April, according to lender Nationwide.
Prices rose 0.7 per cent compared with November, higher than the 0.1 per cent rise expected by economists, taking the average house price to £269,426, just below a record high in 2022.
Nationwide said home prices were 4.7 percent higher in December than a year earlier, the fastest annual pace since October 2022 and beating economists’ expectations for a 3.8 percent increase.
“Mortgage market activity and home prices proved surprisingly resilient in 2024 given the ongoing affordability challenges facing potential buyers,” Robert Gardner, Nationwide’s chief economist, said Thursday.
Nicky Stevenson, managing director at estate agents group 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 stamp duty threshold changes in April 2025,” he added.
Chancellor Rachel Reeves confirmed in the Budget that a temporary stamp duty holiday would end in March, leading many analysts to expect a rush of transactions beforehand. From April, first-time buyers, for example, will start paying the tax on properties worth £300,000 or more, instead of £425,000 currently.
Mortgage rates rose in November after the budget, reflecting expectations that the Bank of England will cut borrowing costs more slowly than previously forecast.
However, borrowing costs remain well below their peak last summer. The average two-year fixed rate quoted at 60 percent loan-to-value was 4.39 percent in November, according to data from the Bank of England. That was up from 4.21 percent in October, but well below the 6.22 percent reached in July 2023.
“The nationwide house price index suggests that growth from pent-up demand released after the Budget had some further to go,” said Alex Kerr, economist at Capital Economics. “It is surprising that the increase in demand appears to have offset the recent rise in mortgage rates.”
House prices rose in all regions in the final quarter of 2024, with Northern Ireland reporting the fastest annual pace at 7.1 per cent, according to Nationwide.
However, the lender reported that across England there was “a clear north-south divide” in house price performance in 2024, with an increase of 4.9 per cent in the north but only a 2.2 per cent increase in the south.
Gardner expects UK house prices to rise between 2 per cent and 4 per cent in 2025.
It also predicts housing market activity will gradually strengthen “as affordability constraints ease through a combination of modestly low interest rates and earnings outpacing house price growth.”
