House prices in the UK increased at their fastest annual pace in two years, rising by 4.9% in the 12 months to January, according to the latest figures from the Office for National Statistics (ONS).
The average property price now stands at £269,000, marking the sharpest rate of growth since January 2023 and an acceleration from the 4.6% recorded in the year to November.
Regionally, house prices in England rose by 4.8% to an average of £291,000, while in Wales, prices increased by 6.0% to £210,000. In Scotland, the average price climbed by 4.6% to £187,000 over the same period.
The North East recorded the strongest annual house price inflation of any English region, with values rising by 9.1% in the year to January, up from 6.9% in December. London remained the weakest performer, with prices increasing by just 2.3%, albeit an improvement on the 0.4% rise in December.
Meanwhile, rental prices across Britain rose by 8.1% in the year to February, reaching an average of £1,326 per month. This marked a slight easing from the 8.7% increase recorded in January.
INDUSTRY REACTION
Darrell Walker, group sales director at Chetwood Bank for ModaMortgages and CHL Mortgages for Intermediaries, said: “The latest house price data reflects a trend of sustained growth, which we expect to continue, especially as this ONS data does not include the early months of 2025, which have been particularly busy.
“This upward trajectory will help build strong momentum so that, once the new Stamp Duty threshold changes and the Spring Statement are behind us, the property market can thrive in more of a ‘business as usual’ environment.
“We’ve seen an increasing number of enquiries from landlords diversifying their portfolios to include alternative asset types like HMOs, which should support further growth in property prices.
“We expect investors who have been waiting to implement their plans to move forward in the coming weeks, meaning we expect to stay busy in the months ahead. All eyes now turn to the Chancellor’s speech later today, and the OBR’s economic forecasts in particular, which will likely influence the Bank of England’s decision making.
“In any case, for investors to capitalise on the momentum the market has enjoyed so far this year, speed and flexibility in financing will be key. Indeed, with the base rate still at 4.5%, the quality of service will be just as critical. The onus is now on lenders to deliver a service that meets the demands of both brokers and borrowers, helping them make the most of the continued upward movement in the market.”
HEALTHY MORTGAGE COMPETITION
Kevin Roberts, managing director, L&G Mortgage Services, said: “The first quarter of 2025 has been strong for the property market. Healthy competition between lenders and the return of sub-4% mortgage rates are driving borrower confidence.
“As we move past the artificial stimulus of the upcoming stamp duty changes, the market outlook is positive for homebuyers. The best port of call for any borrower is to consult a professional mortgage adviser. Advisers can offer access to competitive and exclusive products, helping borrowers navigate the market with confidence.”
GREAT SNAPSHOT
Richard Harrison, head of mortgages at Atom bank, said: “The increase reported by the ONS – the highest rate of annual growth since February 2023 – is a great snapshot of the start of this year, with buyers moving quickly out of the blocks in the race to beat the upcoming Stamp Duty deadline.
“This is borne out by figures from Rightmove, showing that the level of agreed deals is up by 9% on the same point last year. Even if the passing of the Stamp Duty deadline leads to a material drop in demand, the underlying lack of supply means prices are unlikely to drop at all over the coming months.
“Cheaper mortgage rates are playing their part, too. Moneyfacts reported significant momentum in rate falls across February, with two and five-year fixes dropping at the fastest pace in six months. With inflation coming in lower than expected, and the markets now predicting there will be two further base rate cuts this year – potentially from as soon as May – the prospect of mortgage rates heading below 4% will buoy buyers.
“However, if lenders are to meet that demand, they will have to be flexible with borrowers who fall outside the Prime category. The challenges of the last few years mean increased numbers of would-be buyers have less than spotless credit records, yet are more than capable of meeting the monthly mortgage repayments. It’s vital that they have access to competitive mortgages, and at high LTVs, if we are to have a housing ladder that functions properly.”
ELEPHANT IN THE ROOM
Alex Upton, managing director – specialist mortgages and bridging, Hampshire Trust Bank, said: “Rising rents have become a reality for tenants, driven by a fundamental shortage of rental homes. However, there are signs of change. Zoopla’s latest rental market report shows the number of renters competing for each available property has dropped to 12. It’s still high, but an improvement on recent years. This easing in demand may be contributing to a slowdown in rental growth, with Zoopla reporting the lowest level of increases in over three years.
“The elephant in the room is the Renters’ Rights Bill. While the legislation is designed to improve standards, which we fully support, there are concerns that it may reduce rental stock, at least in the short term. That could put upward pressure on rents again.
“But change also brings opportunity. Professional landlords with a long-term mindset are already adapting, shifting their focus to properties that maximise rental yields. Brokers and lenders will need to do the same to support these evolving strategies. If they do, the real winners will be tenants, benefiting from a broader selection of high-quality rental homes in the future.”
STILL MARKET OPTIMISM
Tim Parkes, chief executive of RAW Capital Partners, said:“House prices continue to report positive annual growth, and this very much aligns with the market sentiment we are witnessing on the ground.
“Momentum built towards the end of last year, and activity levels have surged in early 2025. Despite next week’s changes to Stamp Duty thresholds, there’s still optimism that the market will continue perform well throughout the spring and summer months.
“Largely, this confidence stems from the Bank of England’s rate cutting cycle. While rates were held at last week’s meeting, markets anticipate at least two cuts before the year’s end, potentially bringing the base rate down to 4.0%. The economic data the Chancellor will be revealing later today from the Office for Budget Responsibility (OBR) – announced alongside the Spring Statement – will provide some important clues as to whether the Bank has the scope to proceed with these cuts.
“Regardless of what decision comes next, the sector is actively finding ways to facilitate investment, and today’s positive house price data should provide further encouragement. Lenders and brokers must now work together to ensure investors can access the finance they need to sustain this momentum into Q2 and beyond.”
