Nationwide has reported that the annual rate of house price growth slowed to 4.1% in January, compared with 4.7% in December 2024.
House prices rose modestly, up 0.1% month on month.
The average price of a home is now £268,213.
Robert Gardner, Nationwide’s Chief Economist, said: “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.
“Therefore, it’s not surprising that a significant proportion of first-time buyers have to draw on help from friends and family to raise a deposit. In 2023/24, around 40% of first-time buyers had some assistance raising a deposit, either in the form of a gift or loan from family or friends, or through an inheritance.
“Despite these challenges, there has been relatively little change in overall levels of home ownership in recent years. The latest English Housing Survey produced by the Ministry of Housing, Communities & Local Government (MHCLG) showed homeownership rate remained stable in 2024 at 65%.
“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, which is largely a reflection of demographic trends. The proportion of households in the private rented sector remained stable at 19%.
“Looking at trends over the long term, homeownership rates among younger age groups, in particular those aged 25-34 and 35-44, remain well below their 2004 peaks. Homeownership amongst those aged 25-34 has been gradually improving over the last decade however and now stands at 45%, compared to 36% in 2014, though still below 2004 peak of 59%.
“The number of households in England owning their homes outright has increased by 1.3 million over the past 10 years to reach 8.7 million. This reflects demographic developments, in particular a rise in the number of older households (aged 65+), where the number owning outright has increased from 4.5 million to 5.4 million over the last decade.”
A CONFIDENT MARKET
Tomer Aboody, director of specialist lender MT Finance, added: “With Nationwide’s numbers further indicating a confident market, actual growth in prices is very minimal as buyers face a challenging period due to affordability.
“Although rates remain reasonable, many in the market were hoping for a further cut by now, and are hopeful it won’t be long before we get one. More flexibility is needed from lenders in order to help buyers onto the ladder, and many are questioning whether the Chancellor’s growth message is realistic as little help has been evident so far.”
THE MARKET REMAINS TIGHT
Jeremy Leaf, north London estate agent and a former RICS residential chairman, stated: “Price growth is softening, partly in response to a new year bounce in supply but also as the impact of the spike in first-time buyer demand prompted by April’s withdrawal of the stamp duty concession falls away.
“Looking forward, although wages have been outpacing inflation over recent times, which has helped to boost confidence, affordability concerns have never gone away. The market remains tight and little change is expected over the next few months at least, irrespective of any possible interest rate reductions.”
