Mortgage market activity and house prices proved surprisingly resilient in 2024 given the ongoing affordability challenges facing potential buyers.
That’s the view of the Nationwide, in a market snapshot suggesting a strong start to 2025 after a broadly strong 2024 too.
At the start of last year, house prices remained high relative to average earnings, which meant that the deposit hurdle remained high for prospective first-time buyers. The leader says this was a challenge that had been made worse by record rates of rental growth in recent years, which 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, the Nationwide says 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.
Meanwhile the market’s seen a healthy start to 2025 with average prices up 4.7% over the preceding 12 months.
Northern regions saw higher price growth than southern regions, with Northern Ireland actually being the best performing area for second year running, with prices up 7.1% over 2024. East Anglia was the weakest performing region, with prices up 0.5% over the year.
But there’s a warning of a rocky up-and-down year ahead for the market.
Nationwide chief economist Robert Gardner says: “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% to 4% range in 2025 once stamp duty related volatility subsides.”
