UK house prices bounced upwards in January to a new record as many buyers rushed to complete deals before a stamp duty increase this spring, according to one of the UK’s biggest mortgage lenders.
The average property price rose by 0.7% in January to a new high of £299,138 after dropping 0.2% in December, Halifax said.
Economists and industry analysts expect house prices to continue to rise during 2025, as supply remains constrained and demand stays relatively stable, despite concerns over the UK economy’s momentum from the Bank of England.
Sales are expected to be helped by falling mortgage rates, with markets pricing in at least two more 0.25 percentage point cuts in the base interest rate after the Bank trimmed it to 4.5% on Thursday.
However, the figures from Halifax, which is part of Lloyds Banking Group, suggest that momentum in the market is slowing compared with a year ago. Annual growth eased slightly to 3%, down from 3.4% in December.
Amanda Bryden, the head of mortgages at Halifax, said the housing market had started the year on a positive note – for homeowners and the industry at least.
“Affordability is still a challenge for many would-be buyers, but the market’s resilience is noteworthy,” she said. “There’s strong demand for new mortgages and growth in lending. With a stamp duty increase looming, some of this demand may have come from first-time buyers eager to complete transactions before the end of March.”
Liz Truss’s short-lived government temporarily raised the thresholds at which stamp duty is due in England and Northern Ireland in September 2022 in an effort to spur the housing market, before her reign collapsed in the wake of bond market chaos.
The chancellor, Rachel Reeves, announced in her budget in October that she would end the temporary cuts in April. Scotland and Wales set different taxes on house purchases.
From 1 April, first-time buyers will have to pay tax on homes worth more than £300,000, down from £425,000, and the threshold for a reduced rate for first-time buyers will drop from £625,000 to £500,000. The zero-tax stamp duty threshold that applies to all housing in England will drop to £125,000 from £250,000.
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Changes to stamp duty often prompt a race from buyers to get in before the deadline, followed by a lull. Whether that translates to a slowing housing market will depend to a large extent on the state of the broader economy.
The Bank of England on Thursday halved its forecast for GDP growth from 1.5% to 0.75%, citing weakness in household and business confidence, both of which have fallen since the budget. The prospect of a global trade war started by the US president, Donald Trump, has also alarmed economists.
However, Bryden said: “Despite geopolitical uncertainties, and waning consumer confidence, other key indicators look fairly positive for the housing market. The Bank of England has made its first base rate cut of the year, and there are probably more to come.
“Household earnings are expected to continue outpacing inflation – albeit that gap may narrow – easing some of the financial pressure still being felt from the cost of living squeeze.”
