Average UK house prices rose by 4.6% last year, according to official figures.
This is up from the 3.9% growth rate recorded in the 12 months to November 2024. The average home now costs £268,000.
Northern Ireland saw the strongest growth of 9%, while Scotland saw house prices rise by 6.9%. House price growth was weakest in Wales, at 3%.
Sign up to Money Morning
Don’t miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don’t miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The UK House Price Index is measured by the Office for National Statistics, and lags other indices such as those from Halifax and Nationwide, which have already published data for January 2025.
Halifax says house prices rose by 0.7% last month, taking the average property price to a record high of £299,138. In contrast, Nationwide said house prices edged up by just 0.1% in January.
However, these indices only reflect the lender’s own mortgages, whereas the ONS data captures all residential property sales, including cash sales and those using a mortgage.
Ross Turrell, commercial director at the lender CHL Mortgages, said the 4.6% rise in house prices last year “adds to a growing list of reasons for optimism about the UK property sector”.
He added: “With annual growth holding strong and the Bank of England’s recent rate cut fuelling demand, there is a real sense that market activity is ramping up. As a result, buyers and investors are showing renewed confidence, and market momentum is building.”
How have house prices changed across the UK?
House prices in England increased by 4.3% last year, taking the average property price tag to £291,000.
In Wales, the average home costs £208,000, following 3% house price growth. Scotland saw strong annual growth of 6.9%, with the average home now priced at £189,000.
Over in Northern Ireland, house prices soared by 9%, giving an average property price of £183,000.
The ONS also splits its data down by English region. It found that the North East had the highest house price inflation in the 12 months to December 2024, at 6.7%. This was up from 6.4% in the 12 months to November 2024.
Annual house price inflation was lowest in London, at 0% in the 12 months to December 2024. This was down from 0.5% in the 12 months to November 2024.
Will house prices continue to rise in 2025?
The last few months of the temporary increase to stamp duty thresholds are likely to buoy house prices during the first quarter of 2025.
Since October 2022, the tax has only been levied on homes worth more than £250,000, or £425,000 for first-time buyers. However, these thresholds will drop back to their original levels from 1 April this year – £125,000 for regular buyers and £300,000 for first-time buyers.
It means many buyers are scrambling to complete purchases before 1 April, to save themselves thousands of pounds in stamp duty.
Amy Reynolds, head of sales at London estate agency Antony Roberts, says she had “more applicants in January than in the final quarter of last year, some of whom have found themselves in a position to buy because a first-time buyer has completed their chain”.
However, Reynolds adds that she has concerns about the second quarter of this year after the stamp duty thresholds reduce, due to the state of the UK economy and mortgage rates.
“With the UK economy in a fragile state, we don’t anticipate further drops in the Bank rate in the first half of the year – if anything, we could see fixed mortgage rates edge higher, which will have a negative bearing on activity.”
As well as unveiling its latest house price index today, the ONS also revealed the rate of inflation for the 12 months to January 2025. It said inflation rose by 3%, higher than analysts’ forecasts of 2.8%.
This could cause the Bank of England to delay its next interest rate cut, putting pressure on mortgage rates.
Jason Tebb, president of OnTheMarket, a property portal, commented: “With inflation rising unexpectedly to 3%, the next rate reduction may be pushed back a little as the Bank of England keeps a close eye on inflationary pressures in coming months.”
However, he says that with a number of lenders reducing their mortgage pricing in recent days on the back of lower swap rates – there are now some sub-4% deals on offer – other lenders may follow suit, which would bring average mortgage rates down.
This could encourage house buyers into the market and lift house prices this year.
The average two-year fixed residential mortgage rate is currently 5.41%, down from 5.48% a week ago, according to Moneyfacts. The average five-year fix is 5.23%, down from 5.29%.
