Halifax has released its UK housing market review, showing that house prices hit a record high of £298,083 in 2024, with growth expected to slow in the range of 0% to 3% in 2025.
The housing market surpassed expectations last year, driven by lower mortgage rates and strong wage growth.
With transaction volumes returning to pre-pandemic levels, affordability has improved, although it remains challenging for many potential buyers.
The average UK house price increased by £13,641 from last year, reaching a new peak after the June 2022 high of £293,507.
First-time buyers paid 4.1% more over the past year, with prices at £234,361, while home-movers saw a 5.0% increase to £356,491.
The highest growth was in Northern Ireland at 6.8%, while Scotland saw the slowest at 2.8%.
Annual house price growth was 4.8% to November, the strongest since November 2022, with a monthly drop only in March at -0.9%.
Amanda Bryden, head of Halifax mortgages, said: “2024 was a year when UK property prices once again defied expectations, rising by +4.8% on an annual basis, to now sit at a record high of £298,083.
“The market remained largely flat until the summer, with most of that growth concentrated in the second half of the year.
“Two key factors have driven the recovery in the housing market over the last 12 months.
“The first is lower mortgage rates, at times up to 160 basis points below the peaks of 2022 and 2023.
Bryden added: “Second is that income growth continues to catch up with the consumer price increases of the past few years.
“For new mortgages, monthly costs as a percentage of earnings fell from 33% to 29% over the last year.
“This easing financial pressure has boosted buyer confidence as demand for mortgages reached its highest level in more than two years, with volumes now back in line with pre-pandemic levels, having trailed by around 20% at the start of the year.
“The uneven availability of properties for sale across the country, relative to demand, also continues to underpin prices.
She said: “Higher mortgage rates compared to a few years ago may have made some homeowners hesitant to sell, to avoid triggering an immediate increase in their monthly mortgage cost when they move.
“Additionally, new build completions were at their lowest level since 2018, excluding the pandemic lockdown periods.
“Looking ahead to 2025, despite the positive trends we’ve seen over recent months, there’s no doubt mortgage affordability remains a challenge for many buyers.
She added: “While further cuts to Bank Rate are still on the cards, the pace looks likely to be more gradual than previously anticipated, and many homeowners with older fixed-rate deals ending next year face refinancing at much higher rates.
“But with employment conditions remaining positive, buyer demand should continue to hold up well.
“We expect modest house price growth in 2025, likely a little lower than this year at up to +3%, along with a further small increase in the number of transactions.”
