House price growth slowed in the first month of 2025, as affordability pressures continued to hamper the market.
The Nationwide House Price Index showed the annual rate of house price growth slowed to 4.1% in January, compared with 4.7% in December.
During January, the average price rose just 0.1% month-on-month to £268,213.
Karen Noye, mortgage expert at Quilter, said: “Strong employment levels, easing inflation, and better mortgage rates have kept demand steady, especially in some areas but this softening shows affordability is still having an impact.
“Many first-time buyers have, in recent weeks, been scrambling to get their property sales motoring ahead of the stamp duty rules changing in April. This might bloat prices in weeks to come as people lock in deals in the hope they can avoid higher taxes.
“For most, though, it is now too late, and people will struggle to get a house purchase through before the rule change. Given how much affordability is stretched for first-time buyers, this is yet another blow to those looking to get on the housing ladder.”
According to Halifax, 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.
As a result, in 2023/24, around 40% of first-time buyers required help raising a deposit either in the form of a gift or loan from family or friends or through an inheritance.
Noye added: “Recent announcements that there may be a removal of mortgage red tape with an aim to improve affordability for first-time buyers are welcome. High house prices, increased borrowing costs, and persistent inflation make saving for deposits a real struggle.
“Looking ahead, 2025 has a cautiously optimistic outlook, but there are still challenges. The Bank of England’s expected base rate cuts should gradually lower borrowing costs, which could support demand. Wage growth, along with these lower rates, might boost buyer sentiment in the coming months. However, targeted measures to help first-time buyers will be crucial to reigniting activity at the lower end of the market, which continues to be blighted by affordability concerns.”
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