In This Article:
January’s house price growth in the UK slowed more than expected, rising by just 0.1% month-on-month to £268,213, following a 0.7% gain in December. The surprise slowdown suggests potential impact of high borrowing costs on the housing market amid record mortgage rates.
According to Nationwide, house prices are still up 4.1% compared to the same time last year, but the annual growth rate has slow downed from 4.7% in December. The latest data suggests that the UK property market may be losing some of its previous momentum, as borrowing remains expensive and the cost of living crisis continues to affect many buyers.
Robert Gardner, Nationwide’s chief economist, said that while there has been a modest improvement in affordability over the past year, the situation remains difficult by historical 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%,” he explained.
Read more: The cheapest and most expensive places to rent in Britain
House prices are still high relative to average earnings. The first-time buyer house price to earnings ratio stood at 5.0 at the end of 2024, significantly higher than the long-term average of 3.9. This has made it challenging for many to save for a deposit, with the burden worsened by the record rise in rents in recent years. The cost of living crisis has further eroded the ability of renters to save for a home.
Sarah Coles, Yahoo Finance UK columnist and head of personal finance at Hargreaves Lansdown said: “Prices are still under pressure from buyers trying to clamber through the stamp duty holiday window, before it slams shut at the end of March.”
“Given these hurdles, it is not surprising that a significant proportion of first-time buyers are relying on financial assistance from family or friends,” Gardner added. “In 2023/24, around 40% of first-time buyers had some form of deposit help, whether through a gift, loan or inheritance.”
Despite these pressures, the rate of homeownership has remained largely stable in recent years. Nationwide's analysis cites data from the latest English Housing Survey, which shows the homeownership rate at 65% in 2024, unchanged from the previous year. Also, the proportion of people owning their homes with a mortgage has edged up, though the majority (around 55%) own outright. This reflects shifting demographic trends, particularly among older households.
Gardner pointed out that while homeownership among younger age groups remains below 2004 levels, there has been some improvement. For instance, the homeownership rate for those aged 25-34 has gradually risen from 36% in 2014 to 45% in 2024, though still far below the 59% peak seen in 2004.