Amanda Bryden, Head of Mortgages, Halifax, said:
"The UK housing market started the year on a positive note, with average prices rising by +0.7% in January, more than recovering the slight dip of -0.2% in December. This increase pushed the average property price to a new record high of £299,138. However, annual growth slowed to +3.0%, the slowest rate since last July.
"Affordability is still a challenge for many would-be buyers, but the market's resilience is noteworthy. There’s strong demand for new mortgages and growth in lending. With a stamp duty increase looming, some of this demand may have come from first-time buyers eager to complete transactions before the end of March.
"Despite geopolitical uncertainties, and waning consumer confidence, other key indicators look fairly positive for the housing market. The Bank of England has made its first base rate cut of the year, and there are probably more to come. Household earnings are expected to continue outpacing inflation – albeit that gap may narrow – easing some of the financial pressure still being felt from the cost-of-living squeeze.
"As things stand, mortgage rates are likely to hover between 4% and 5% in 2025, influenced by both global financial markets and domestic monetary policy. Over the past year, buyers have been getting used to this new normal, understanding that rates are unlikely to return to the historical lows of 1%.
"But the fundamental issue in the housing market remains the lack of supply. This long-term trend, coupled with a gradual improvement in affordability, should support further modest house price growth this year."
