Where Next for UK House Prices in 2025? Experts Predict Slowing Growth Amid Improving Mortgage Affordability
As the UK housing market enters the mid-2025 selling season, signs point to a slowing of house price growth after years of steady increases. Recent data suggests a cooling market, but upcoming interest rate cuts could improve mortgage affordability and support demand.
Key Insights on UK House Prices and Market Outlook for 2025
- July saw a dip in average house prices according to some surveys, although official Office for National Statistics (ONS) data for recent months is still awaited.
- Mortgage affordability is set to improve following the Bank of England’s interest rate cut from 5.25% to 4.25%, with further reductions expected in August.
- The UK economy remains fragile with recession concerns easing slightly as tariff uncertainties decline.
UK House Prices Showing Signs of Stalling
The summer of 2025 is revealing a market at a crossroads. Data from Rightmove indicates the average UK home price fell by 1.2% in July—the largest July decline in 20 years. Meanwhile, the ONS reported the average UK house price in May was £269,000, marginally down from a recent peak in early 2025.
Housing supply is at a decade high, yet economic uncertainty and higher borrowing costs have made buyers more cautious. Savills has revised its UK house price growth forecast for 2025 down from 4% to just 1%, reflecting a more muted outlook for the year ahead. However, longer-term growth remains robust, with Savills expecting a 24.5% increase over the next five years.
Mortgage Affordability Set to Improve as Interest Rates Fall
Mortgage costs remain a critical factor for UK homebuyers. After peaking at 5.25%, the Bank of England has cut rates to 4.25% and is poised to reduce them further to 4% in August. Some lenders have started offering sub-4% mortgage deals, although terms vary widely and many homeowners will face higher costs as fixed-rate deals expire.
Daniel Austin, CEO of property lender Ask Partners, highlights the need for government intervention to stimulate market confidence, stating, “The housing market has been stagnant with buyers adopting a cautious approach. Targeted policies are vital to support homeownership and market movement.”
Economic Factors and Future Prospects
Morningstar economist Grant Slade notes that trade tariff uncertainties, which pressured house prices earlier this year, have lessened, creating a more positive environment. “While summer market conditions are currently soft, expected monetary easing and a gradual easing in labour market pressures should support UK house prices in the second half of 2025,” Slade adds.
Summary
- UK house price growth is slowing in 2025 amid economic headwinds and high borrowing costs.
- Interest rate cuts anticipated this year are expected to improve mortgage affordability and stimulate demand.
- Long-term house price growth remains positive despite short-term stagnation.
- Government intervention and economic stability will be key to supporting the housing market’s recovery.
