Lower mortgage rates are breathing new life into the housing market, with a noticeable increase in property transactions and a backdrop of modest house price growth. This month's UK House Price Index offers a comprehensive overview of current trends across the housing sector as of May 2025.

Key Trends in the Market

The number of agreed sales in May 2025 is at its highest level in four years, showing a 6% increase compared to the same time last year. This uplift follows the seasonal lull over the Easter period and the market’s initial adjustment to the end of stamp duty relief.

House prices across the UK have risen by 1.6% over the past year. At the same time, there has been a 13% increase in the number of homes listed for sale compared to a year ago, suggesting that seller confidence is returning to the market.

The strongest growth in sale numbers and house prices is being seen in the northern regions of England, where annual house price inflation has reached approximately 3%. Meanwhile, the southern regions, though experiencing a rise in listings, are seeing house price growth of less than 1%.

Across UK cities, the variation in house price performance is striking. Cities such as Brighton and Aberdeen are registering modest price declines, whereas Blackburn and Belfast have seen gains exceeding 5% year-on-year.

Overall, the UK housing market is on course to record a 5% increase in sales volumes and a 2% rise in average prices across the year.

Average House Prices by Property Type

As of April 2025, the average UK house price stands at £268,250. This marks an annual increase of £4,330, or 1.6%. Detached homes are now averaging £450,600, a rise of £5,790 or 1.3% over the past year. Flats and maisonettes have seen the smallest increase, with average prices now at £192,100, just £290 higher than a year ago, equivalent to a 0.2% change.

Semi-detached homes have experienced a stronger increase, with average values up by £7,120 to £276,000, a 2.6% rise. Terraced properties also performed well, climbing by £5,460 to £237,900, which represents a 2.4% increase year-on-year.

Rebound in Sales Post Stamp Duty Relief

Sales volumes have picked up as buyers return to the market following the conclusion of stamp duty relief and the Easter holidays. Our data indicates that the number of sales being agreed per estate agency branch is now at its fastest pace since the post-pandemic surge of 2021. This trend is supported by a broader range of mortgage products now available, including those with rates below 4%, as well as recent changes to mortgage affordability criteria.

There are currently 13% more homes on the market than this time last year, with the average estate agent having around 35 unsold properties on their books. With many sellers also in the market to buy, this stock is helping to fuel transactions reflected in the 6% rise in agreed sales.

Notably, the typical home is being sold for 3% less than the asking price, which equates to a discount of roughly £16,000. This discount level has remained stable in recent months.

Market Dynamics and Affordability

The steep rise in mortgage rates over the past three years has undeniably slowed housing market activity, with 2022 and 2023 seeing a sharp drop in sales. However, 2024 witnessed a strong rebound as rates fell and mortgage approvals picked up. While that growth has since levelled off, the current environment of improved affordability means that mortgage-backed buyers can now borrow up to 20% more than before, helping to boost transaction volumes once again.

Regional Breakdown: Affordability Driving Activity

Areas with more affordable housing are currently leading the way in terms of both sales activity and price inflation. The northern regions of England, alongside Scotland and the East Midlands, have recorded the fastest growth in sales over the past year.

In contrast, affordability pressures are dampening growth across southern England. For example, the West Midlands is actually experiencing a year-on-year decline in sales.

The number of homes available for sale plays a key role in market activity and price growth. A greater supply of properties offers more choice to buyers and helps stabilise prices, while stronger demand can deplete supply and support higher price inflation.

In the North West of England, agreed sales are up by 14% compared to last year. Yorkshire follows closely with a 13% increase. These regions continue to benefit from relatively affordable house prices and stronger employment growth.

South of England: Increased Supply, Softer Prices

Across southern England, the stock of homes for sale has increased significantly. In the South West, listings are up by 21% compared to a year ago. London has seen a 17% increase, and the South East has recorded 15% more homes on the market.

This increase in supply, coupled with slower growth in buyer demand, has resulted in subdued price growth across these areas. Annual house price inflation ranges from just 0.5% in the South East to 0.9% in the South West.

Looking Ahead: What to Expect in 2025

Looking forward, competitive mortgage offers and more flexible lending criteria are expected to support buyer activity during the second half of 2025.

Regional differences in supply and demand mean sellers need to be realistic with pricing if they want to secure a sale, while buyers must understand local market dynamics when making offers.

Overall, we forecast a 5% increase in transaction volumes this year compared to 2024, with average house prices rising by around 2%, enough to keep both buyers and sellers engaged in the market.