House prices across the UK finished last year strongly, up 4.7% compared with December 2023, according to Nationwide Building Society.

However, prices were just below the all-time high recorded in summer 2022.

House prices increased by 0.7% month on month, after taking account of seasonal effects, following a 1.2% rise in November.

* Seasonally adjusted figure (note that monthly % changes are revised when seasonal adjustment factors are re-estimated)

Robert Gardner, Nationwide’s chief economist, said: “Mortgage market activity and house prices proved surprisingly resilient in 2024 given the ongoing affordability challenges facing potential buyers. At the start of the year, house prices remained high relative to average earnings, which meant that the deposit hurdle remained high for prospective first-time buyers. This is a challenge that had been made worse by record rates of rental growth in recent years, which has hampered the ability of many in the private rented sector to save.

“Moreover, for many of those with sufficient savings for a deposit, meeting monthly payments was a stretch because borrowing costs remained well above those prevailing in the aftermath of the pandemic. For example, a typical mortgage rate for someone with a 25 per cent deposit hovered around 4.5% for much of the year, three times the 1.5% prevailing in late 2021, before the Bank of England started to raise the Bank Rate.

“As a result, 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.

Where next in 2025?

“Upcoming changes to stamp duty are likely to generate volatility, as buyers bring forward their purchases to avoid the additional tax. This will lead to a jump in transactions in the first three months of 2025 (especially in March) and a corresponding period of weakness in the following three to six months, as occurred in the wake of previous stamp duty changes. This will make it more difficult to discern the underlying strength of the market.

“But, providing the economy continues to recover steadily, as we expect, the underlying pace of housing market activity is likely to continue to strengthen gradually as affordability constraints ease through a combination of modestly lower interest rates and earnings outpacing house price growth. The latter is likely to return to the 2-4% range in 2025 once stamp duty related volatility subsides.

“Our regional house price indices are produced quarterly, with data for Q4 (the three months to December) indicating that all regions saw price rises over 2024.

“Northern Ireland was the best performing area for the second year running, with prices up 7.1% over the year. Scotland recorded a 4.4% increase in 2024, whilst Wales saw a 2.7% year-on-year rise.

“Across England overall, prices were up 3.1%, compared with Q4 2024. There was a clear north-south divide in house price performance in 2024 as Northern England (comprising North, North West, Yorkshire & The Humber, East Midlands and West Midlands) continued to outperform southern England, with prices up 4.9% year on year. The North was the best performing English region, with prices up 5.9% year on year.”

Paresh Raja, CEO of Market Financial Solutions, added: “For all the negativity that seemed to swirl around the property market last year, this data from Nationwide is a timely reminder that the reality is often far more positive than the speculation and debate surrounding house prices.

“On the one hand, a change in government and ongoing economic uncertainty undoubtedly caused challenges for buyers and sellers in 2024. On the other hand, two cuts to the base rate by the Bank of England, and expectations that there are more to come in 2025, gave borrowers greater confidence to re-enter the market, boosting buyer demand. That the average house price rose by nearly 5% underlines the remarkable resilience of the property market.

“We are clearly entering the New Year with some positive momentum. If further interest rate cuts do materialise, this momentum should build further. As lenders, we must be on hand to support borrowers and brokers, delivering the right products with speed and flexibility to ensure the market as a whole can flourish in 2025.”