House price growth softens at the start of 2025
- Annual rate of house price growth slowed to 4.1% in January, compared with 4.7% in December
- House prices up 0.1% month on month
- Little change in overall rate of home ownership in recent years despite affordability pressures
Commenting on the figures, Robert Gardner, Nationwide’s Chief Economist, said:
“The price of a typical UK home rose by 4.1% year on year in January, a modest slowing in the annual pace of growth compared with December. House prices increased by 0.1% month on month, after taking account of seasonal effects.
“The housing market continues to show resilience despite ongoing affordability pressures. As we highlighted in our recent affordability report, while there has been a modest improvement over the last year, affordability remains stretched by historic standards. A prospective buyer earning the average UK income and buying a typical first-time buyer property with a 20% deposit would have a monthly mortgage payment equivalent to 36% of their take-home pay – well above the long-run average of 30%.
“Furthermore, house prices remain high relative to average earnings, with the first-time buyer house price to earnings ratio standing at 5.0 at the end of 2024, still well above the long run average of 3.9. Consequently, the deposit hurdle remains high. This is a challenge that has been made worse by the record increase in rents in recent years, which, together with the cost-of-living crisis more generally, has hampered the ability of many in the private rented sector to save.
“Therefore, it’s not surprising that a significant proportion of first-time buyers have to draw on help from friends and family to raise a deposit. In 2023/24, around 40% of first-time buyers had some assistance raising a deposit, either in the form of a gift or loan from family or friends, or through an inheritance.
“Despite these challenges, there has been relatively little change in overall levels of home ownership in recent years. The latest English Housing Survey produced by the Ministry of Housing, Communities & Local Government (MHCLG) showed homeownership rate remained stable in 2024 at 65%.
“There was a slight increase in the number of people owning their home with a mortgage, although the majority of homeowners (around 55%) own outright, which is largely a reflection of demographic trends. The proportion of households in the private rented sector remained stable at 19%.
“Looking at trends over the long term, homeownership rates among younger age groups, in particular those aged 25-34 and 35-44, remain well below their 2004 peaks. Homeownership amongst those aged 25-34 has been gradually improving over the last decade however and now stands at 45%, compared to 36% in 2014, though still below 2004 peak of 59%.
“The number of households in England owning their homes outright has increased by 1.3 million over the past ten years to reach 8.7 million. This reflects demographic developments, in particular a rise in the number of older households (aged 65+), where the number owning outright has increased from 4.5 million to 5.4 million over the last decade.”
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