For the end of 2024, the UK housing market gave off vibes of continued growth which is what experts have forecasted for this year. Nationwide reported in their data for December the average UK home reached a cost of £269,426 which is an annual increase of nearly £12,000. This is the fourth consecutive month of an increase to the average house price and this trend will likely continue, at least through the first quarter of 2025.

The stamp duty had been adjusted to a higher level to help buyers onto the property ladder. This helped buyers save money and perhaps even helped first time buyers stay in the market keeping affordability within reach. As of the end of March, the discount will be removed as the stamp duty reverts to its usual level. This is expected to push buyers to take action before the deadline which will result in a boost in the market. After the deadline, there could be a lull in home buying, but it will likely be a reflection of lower thresholds for purchases in stamp duty levels versus a strain on the economy.

The monthly average house price increase reported for December by Nationwide was 0.7%. 

In response to the December report, Nationwide’s chief economist, Robert Gardner, noted that the current average house price still remains below the all-time high set in the summer of 2022 when the Bank of England’s Monetary Policy Committee (MPC) was voting for an increase to the standard base interest rate at each and every meeting. 

The votes continued for rate increases throughout 2022 and after growing from 0.1% in December 2021 to 5.25% in August 2023, the MPC voted to keep the base rate steady in September 2023. It remained at work against inflation until August 2024, when the MPC voted for the first time since March 2020 to reduce the base rate. It declined to 5.0% and then another majority vote to cut the rate came in November and took the base to the current 4.75%.

Despite inflation growing from 1.7% to 2.3% in October and 2.6% in November of last year, lenders have remained optimistic about the economic future and are still competitively offering rates near the current base rate despite the MPC voting to hold the rate steady in December and drown the hopes of a third rate cut in 2024.

The expectation for 2025 should inflation correct toward the target level of 2.0% set by the Bank, is for the MPC to offer at least three or possibly four rate cuts this year.

Robert Gardner reflected on the housing market of the past year and remarked, “Mortgage market activity and house prices proved surprisingly resilient in 2024 given the ongoing affordability challenges facing potential buyers. It was encouraging that activity levels in the housing market increased over the course of 2024, with the number of mortgages approved for house purchase each month rising above pre-pandemic levels towards the end of the year.”

The fact that the market remained active and experienced growth in the last four months is eye opening considering the typical home in the UK increased by almost £12,000 during 2024 and much of the year the base rate was 5.25%.

Home buyers are not the only borrowers taking advantage of the current attractively low rates as homeowners are choosing remortgages for the ability to save money with a lower rate or to avoid a standard variable rate (SVR) when their current mortgage deal ends. 

The expected continued growth in the housing market could help homeowners as it normally translates that higher house prices result in higher property values. When seeking a remortgage, homeowners with higher property values could discover they have lower loan to value ratios (LTV) which will result in lenders offering lower interest rates due to less risk in lending.

The takeaway from the forecast on the UK housing market is that while there may be a large boost the first quarter but if a slowdown occurs after it could be merely the lack of rush to buy after the stamp duty returns to normal at the end of March and not that the economy is repeating another bumpy year like 2024.