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UK house prices rose more than expected in December, bolstered by buyers rushing to complete deals ahead of an increase in stamp duty in April, according to lender Nationwide.
Prices increased 0.7 per cent compared with November, higher than the 0.1 per cent rise expected by economists, taking the average house price to £269,426, just below a record high hit in 2022.
Nationwide said house prices were 4.7 per cent higher in December than a year earlier, the fastest annual pace since October 2022 and exceeding economists’ expectations of a 3.8 per cent increase.
“Mortgage market activity and house prices proved surprisingly resilient in 2024 given the ongoing affordability challenges facing potential buyers,” Robert Gardner, Nationwide’s chief economist, said on Thursday.
Nicky Stevenson, managing director at estate agent group Fine & Country, said house prices “continued to defy expectations, with house prices continuing to rise despite the usual seasonal slowdown”.
“This reflects strong demand as buyers moved quickly to secure deals ahead of the April 2025 stamp duty threshold changes,” he added.
Chancellor Rachel Reeves confirmed in the Budget that a temporary stamp duty holiday would end in March, prompting many analysts to expect a rush of transactions beforehand. From April, first-time buyers, for example, will start paying the levy for properties worth £300,000 or more, instead of £425,000 at present.
Mortgage rates ticked up in November after the Budget, reflecting expectations that the Bank of England will lower borrowing costs more slowly than previously forecast.
However, borrowing costs remain much lower than their peak last summer. The average quoted two-year fixed rate with 60 per cent loan to value was 4.39 per cent in November, according to data from the Bank of England. That was up from 4.21 per cent in October but well below the 6.22 per cent reached in July 2023.
“Nationwide house price index suggests that the boost from pent-up demand released after the Budget had a bit further to run,” said Alex Kerr, economist at Capital Economics. “It is striking that the boost to demand appears to have offset the recent rise in mortgage rates.”
House prices increased in all regions in the final quarter of 2024, with Northern Ireland reporting the fastest annual pace at 7.1 per cent, according to Nationwide.
However, the lender reported that across England there was “a clear north-south divide” in house price performance in 2024, with a 4.9 per cent increase in the north but just a 2.2 per cent rise in the south.
Gardner expects UK house prices to increase between 2 per cent and 4 per cent in 2025.
He also forecasts housing market activity to strengthen gradually “as affordability constraints ease through a combination of modestly lower interest rates and earnings outpacing house price growth”.