by Sam Akbay
A Resilient Market Amidst Economic Shifts
In May 2025, the UK housing market demonstrated remarkable resilience, with house prices increasing by 0.5%, effectively reversing the 0.6% decline observed in April. This growth brought the average house price close to the record highs seen in 2022, surpassing economists’ forecasts and signaling a robust rebound in the sector.
Key Drivers of the Rebound
Several factors contributed to this unexpected uptick:
Easing Mortgage Rates: The Bank of England’s decision to lower the base rate to 4.25% in early 2025 has led to a decrease in mortgage interest rates, making borrowing more affordable for prospective buyers.
Rising Wages: A steady increase in household incomes has improved affordability, enabling more individuals to enter the housing market.
Increased Market Activity: Data from Nationwide indicates a 3.5% year-on-year rise in house prices, with Zoopla reporting heightened activity levels and a greater number of homes available compared to spring 2024.
Impact of Stamp Duty Changes
The housing market experienced volatility due to changes in stamp duty thresholds. In April, a rush to complete purchases before the end of temporary stamp duty exemptions led to a surge in transactions, followed by a dip in activity. However, May’s data suggests that this was a temporary blip, with the market quickly stabilizing thereafter.
Affordability Concerns and Buyer Behavior
Despite the positive trends, affordability remains a concern, particularly for first-time buyers. Many are now opting for 40-year mortgages to manage repayments, with UK Finance reporting that these borrowers spend about 23% of their income on mortgage payments—levels reminiscent of the 2008 financial crisis.
Additionally, new mortgage rules aimed at reducing required deposit amounts and easing stress testing requirements are expected to make homeownership more accessible. Savills research suggests these changes could lead to a 5% to 7.5% increase in average house prices over the next five years.
Regional Variations and Future Outlook
While the national average shows growth, regional disparities persist. Areas such as the Midlands, Northern England, Scotland, and Wales are projected to outperform the UK average, while southern England may lag due to ongoing affordability pressures. zoopla.co.uk
Looking ahead, experts anticipate continued price growth, with forecasts ranging from 2% to 4.5% annually over the next two years. Savills has upgraded its five-year forecast for UK house price growth to 23.4%, reflecting stronger-than-expected market performance and a modest improvement in demand indicators.
The UK housing market’s performance in May 2025 underscores its resilience amidst economic shifts and policy changes. While challenges such as affordability and regional disparities remain, the combination of easing mortgage rates, rising wages, and supportive policy measures suggests a positive trajectory for the market in the coming years.
Whether you’re planning your next move or just curious about your home’s value, we’re here to help. Let’s have a chat—your next step could be closer than you think.
