House price inflation in the UK is continuing to lose momentum, with seasonal factors and economic uncertainty contributing to a slowdown in buyer demand. Meanwhile, an increasing supply of homes is giving buyers more choice and helping to keep prices in check.

Market Overview

As of March 2025, the average house price in the UK stands at £267,400, marking a 1.6% annual increase. While this represents a rise from the 0.2% annual inflation recorded a year ago, it is down from 1.9% at the end of 2024. Prices are expected to grow by 2.5% over the course of the year, but the pace of growth is slowing.

Demand from buyers rose slightly in early 2025, partly driven by the end of stamp duty relief in England and Northern Ireland. However, this demand has since eased due to typical seasonal slowdowns and wider economic uncertainties, including concerns about tariffs and global events. Currently, buyer demand is roughly 1% higher than this time last year, while sales agreed are up by 6%.

More Homes on the Market

The number of homes listed for sale has risen significantly, 12% higher than last year. Estate agents now have an average of 34 homes for sale, compared to 31 a year ago and just 15 during the peak of the pandemic property boom. This increase in supply reflects the fact that many sellers are also prospective buyers, which supports ongoing transaction activity.

Regional Trends

There is a clear divergence in price growth across the country. In southern England, where affordability remains a key concern, house price growth has slowed to below 1%. These regions are seeing softer demand following the end of stamp duty support.

Conversely, regions such as the West Midlands, the North of England, Wales, and Scotland are seeing price increases between 2.2% and 3%, with Northern Ireland leading with a 6% rise. Homes in these areas are generally more affordable, making home ownership more accessible and sustaining a healthier pace of growth.

Sales agreed are up year-on-year across all UK regions, with Wales, the North West, and the North East each recording a 10–14% rise in agreed sales.

Mortgage Affordability and Lending

An important shift is underway in how mortgage lenders assess affordability. Historically, lenders have applied high stress test rates, often up to 8–9% to ensure borrowers can handle repayments in the event of rate increases. Today’s average 5-year fixed mortgage sits around 4.5%, yet these stress tests make it difficult for many, especially first-time buyers, to secure finance without a large deposit.

If lenders ease these tests to more typical levels closer to 6.5–7%—it could enhance buying power by 15–20%. For example, a first-time buyer paying £1,020 per month at 4.5% currently needs to prove they can afford £1,550 at the stress-tested rate. Lowering that test would bring the required figure down to £1,275, making mortgages more accessible.

This change is unlikely to inflate house prices significantly but will likely support demand and help reduce the stock of unsold homes.

Looking Ahead

Despite continued economic headwinds, the housing market has proven resilient. There is still strong underlying activity, particularly as more sellers come to market. Provided sellers remain realistic on pricing, the market is expected to deliver around 5% more completed sales in 2025 than in the previous year.

Price growth is expected to slow further in the months ahead, likely settling between 1% and 1.5%. At the same time, the Bank of England may cut the base rate later in the year, helping to keep average fixed mortgage rates within the 4–5% range and supporting steady market activity.

In summary, while house price inflation is cooling, the increased availability of homes and potential boost to mortgage affordability could keep the housing market moving forward at a stable pace.