As we move into February 2025, the UK housing market shows signs of slowing, with house price growth softening slightly in January, according to Nationwide.
While prices still rose by a modest 0.1% month-on-month, the annual growth rate dipped by 0.6% in December. With affordability pressures continuing to challenge buyers, especially first-time buyers, experts are closely watching the impact of new government mortgage policies aimed at easing entry into the housing market.
However, these changes may lead to higher house prices, potentially making homeownership even more difficult for those who are looking at buying a house.
House prices soften at start of 2025
House prices continued to show signs of resilience in January 2025, with the annual growth rate softening slightly to 4.1%, down from 4.7% in December 2024.
While house prices rose by a modest 0.1% month-on-month, there are concerns that changes in Government policies may fuel further price increases in the coming months.
According to Nationwide’s Chief Economist, Robert Gardner: “The price of a typical UK home rose by 4.1% year-on-year in January, a modest slowing in the annual pace of growth compared to December. House prices increased by 0.1% month-on-month, after taking account of seasonal effects."
Despite the modest slowing in the annual growth rate, the housing market remains resilient, showing minimal change in the overall rate of homeownership in recent years. However, affordability pressures persist, especially for first-time buyers. The current mortgage landscape continues to challenge many buyers, with monthly mortgage payments now absorbing a significant portion of take-home pay.
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Gardner added: “While there has been a modest improvement in affordability 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%."
Robert Gardner
Robert Gardner serves as the Chief Economist at Nationwide, where he heads a team dedicated to offering economic analysis and guidance, with a specific focus on the UK economy and a strong emphasis on monitoring the housing market and house prices.
Challenges in home ownership persist
Nationwide’s data shows that, despite these affordability challenges, homeownership levels remain stable.
According to the latest English Housing Survey, homeownership in the UK remained unchanged at 65% in 2024. However, for younger buyers, the dream of owning a home is increasingly difficult to realise. Those aged 25 to 34 still struggle, though homeownership rates in this age group have shown a steady improvement since 2014.
“There was a slight increase in the number of people owning their home with a mortgage, although the majority of homeowners (around 55%) own outright,” said Gardner. This trend is largely due to demographic shifts, particularly the rise in the number of older homeowners.
Government mortgage changes could push prices higher
In an effort to ease access to homeownership, the government is introducing changes to mortgage policies that could lower barriers for first-time buyers.
However, experts warn that these changes may inadvertently push house prices up. One analysis suggests that these new policies could lead to an increase of £20,000 in house prices in 2025 alone.
Jonathan Bone, Head of Mortgages at Better.co.uk, offers advice to first-time buyers looking to navigate this challenging landscape. He suggests taking advantage of government schemes such as Shared Ownership, Stamp Duty Relief, and Lifetime ISAs, which offer financial relief to those struggling to save a deposit.
What can first-time buyers do?
House price rises in the last 50 years mean first-time buyers will on average have to wait till their 30s to get on the property ladder(Image credit: Getty Images)
To make homeownership more achievable, Bone outlines several steps prospective buyers can take:
Take advantage of government schemes: Initiatives such as Shared Ownership and Stamp Duty Relief can significantly lower the upfront costs of purchasing a home.
Save for a larger deposit: A larger deposit can reduce monthly mortgage repayments and unlock better interest rates, making monthly payments more manageable.
Shop around for mortgage deals: With varying mortgage rate rises across lenders, buyers should compare offers and consider using a mortgage broker for expert guidance and fee-free services.
Reconsider desired locations: Exploring less expensive areas outside the more expensive regions of the UK, such as London and the South East, can help reduce costs and offer long-term investment potential.
Be patient and plan long-term: The housing market is subject to fluctuations, so it may be wise for buyers to wait for the right moment to enter the market and plan their savings realistically.
Outlook for February
As February approaches, it remains uncertain whether the government’s policy changes will have the desired effect of boosting first-time homeownership or if they will further inflate house prices, according to Gardner.
He claims the combination of economic pressures, shifting market dynamics, and affordability concerns will likely continue to shape the housing market in the coming months.
However, he does predict that while house prices may slow in the short term, those looking to buy will need to carefully consider their financial situation and explore all available options to make homeownership a reality.
Looking ahead to the rest of 2025, the outlook for house prices remains uncertain as government policies and affordability pressures continue to shape the market.
As the year progresses, keeping an eye on house prices in February and beyond will be crucial for anyone looking to make a move in the property market.
News Editor Joseph has previously written for Today’s Media and Chambers & Partners, focusing on news for conveyancers and industry professionals. Joseph has just started his own self build project, building his own home on his family’s farm with planning permission for a timber frame, three-bedroom house in a one-acre field. The foundation work has already begun and he hopes to have the home built in the next year. Prior to this he renovated his family's home as well as doing several DIY projects, including installing a shower, building sheds, and livestock fences and shelters for the farm’s animals. Outside of homebuilding, Joseph loves rugby and has written for Rugby World, the world’s largest rugby magazine.
