House prices increased by just 0.1% in January with experts attributing the slowdown to affordability challenges.
Over the year to January 2025, house prices grew by 4.1% compared to 4.7% in December, according to the latest Nationwide House Price Index.
The 0.1% monthly increase in January comes following a rise of 0.7% in December and means the average house price in the UK is currently £268,213 according to Nationwide.
Robert Gardner, Nationwide’s chief economist, said January saw a ‘modest slowing in the annual pace of growth compared with December’.
He added: “The housing market continues to show resilience despite ongoing affordability pressures. As we highlighted in our recent affordability report, while there has been a modest improvement 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%.
“Furthermore, house prices remain high relative to average earnings, with the first-time buyer house price to earnings ratio standing at 5.0 at the end of 2024, still well above the long run average of 3.9. Consequently, the deposit hurdle remains high.
“This is a challenge that has been made worse by the record increase in rents in recent years, which, together with the cost-of-living crisis more generally, has hampered the ability of many in the private rented sector to save.”
What is the outlook for house prices in 2025?
It is expected house prices will inflate in the next few months as buyers rush to complete on purchases before stamp duty increases come in effect on 1 April.
However, it is thought the calm after this initial storm may see house prices reset again the period after this.
Karen Noye, mortgage expert at Quilter said the stamp duty changes will be another blow to those looking to get onto the housing ladder and this could impact the rest of the property market. Indeed, she explained, first-time buyers were a vital cog in this particular wheel.
“Without them,” she said, “the market risks becoming ‘glued up,’ with chains stalling and transactions slowing down. Existing homeowners looking to sell and move up the ladder rely on first-time buyers to keep things moving.”
She added: “Looking ahead, 2025 has a cautiously optimistic outlook, but there are still challenges. The Bank of England’s expected base rate cuts should gradually lower borrowing costs, which could support demand.
“Wage growth, along with these lower rates, might boost buyer sentiment in the coming months. However, targeted measures to help first-time buyers will be crucial to reigniting activity at the lower end of the market, which continues to be blighted by affordability concerns.
“For those thinking about moving, 2025 is a good time to reassess plans. While the signs of market stabilisation are encouraging, there’s still some uncertainty, and careful financial planning will be key to navigating what could be a tricky year.”
