The housing market is recalibrating after a wave of consumers rushed to finish purchases earlier than the stamp responsibility improve in April — prompting fears of a post-deadline slowdown.
At the identical time, nevertheless, falling mortgage charges and extra versatile lending have helped to counter a few of the affect of upper tax payments by giving consumers an affordability increase.
As the modifications proceed to ripple by way of the market, Mortgage Strategy talks to business consultants to gauge what lies ahead for house costs, each this 12 months and past.
Mixed image
House-price indices present a blended image after an extra-busy first quarter fuelled by the stamp responsibility deadline.
Rightmove’s newest figures reveal that the typical asking worth for new property listings reached a file excessive of £379,517 in May — up 1.2% 12 months on 12 months. While progress stays in optimistic territory, the property portal famous that it was the bottom seasonal improve for this time of 12 months since 2016, because of a 10-year excessive within the variety of properties listed for sale, which is preserving costs in verify.
A house that seems over-priced in comparison with the competitors might not get a re-evaluation
Rightmove property skilled Colleen Babcock says: “The 10-year excessive implies that sellers want to pay attention to the extent of competitors they’re going through for the eye of consumers, and of the costs which might be being marketed of their location.
“Buyers might have a number of comparable properties to select from of their space and a house that seems over-priced in comparison with the competitors might not get a re-evaluation.”
Babcock says the present market favours consumers and is extra subdued than standard.
Market bounceback
In the aftermath of the stamp responsibility hikes, purchaser demand slowed in April to 4% decrease than for the identical month in 2024. However, demand within the 12 months up to now remains to be 3% ahead of final 12 months and there are early indicators of a bounceback in May, in accordance with Rightmove.
The variety of gross sales agreed up to now month is 5% increased than right now final 12 months, with Rightmove suggesting that, despite the fact that some consumers are spoiled for alternative, many are nonetheless being tempted by the best property on the proper worth.
Much will rely on inflation stabilising, rates of interest falling and the continued undersupply of housing
Zoopla’s index, which tracks the typical worth of agreed gross sales somewhat than what sellers are asking, additionally suggests {that a} bounceback is gaining momentum, with consumers returning to the market following the stamp responsibility deadline and the Easter lull.
Average offered costs are 1.6% increased than a 12 months in the past, at £268,250, a rise of £4,330 over 12 months. The variety of gross sales agreed in May is the very best for the reason that pandemic growth of 2021. Zoopla says that is because of the better variety of properties for sale, with 13% greater than a 12 months in the past, in addition to decrease mortgage charges and wider alternative.
Affordability increase
An easing of lenders’ affordability calculations means debtors can afford to borrow 20% greater than they may earlier this 12 months, which is supporting the expansion in gross sales, provides Zoopla. Meanwhile, properties are promoting for a median of £16,000 beneath asking worth — a stage that has remained secure over current months — making it essential for sellers to cost realistically.
The market is strongest within the Northwest, the place costs rose by 3% 12 months on 12 months, and in Scotland, the place they elevated by 2.9%. Employment progress, good affordability and a extra restricted provide of properties for sale are driving worth beneficial properties in cities reminiscent of Blackburn, which noticed a 5% bounce. Meanwhile in southern England a better inventory of listings has restricted worth will increase to lower than 1% throughout all areas.
We’re seeing some smaller landlords promoting up, notably within the Southeast and elements of London, resulting from tighter regulation, tax modifications and the dearth of potential capital appreciation
Zoopla govt director Richard Donnell says: “The housing market has adjusted to increased mortgage charges over the previous three years, with modest worth falls over 2023 and a big, preliminary drop in housing gross sales, which have largely recovered to their long-run common.”
Donnell says the market is on observe for 5% extra gross sales this 12 months, in comparison with 2024, with 1.15 million predicted transactions.
“The outlook for the market is rooted in housing affordability, which varies extensively between southern areas of England and the remainder of the UK. Higher borrowing prices have hit the South tougher, the place costs are increased than in northern England and Scotland, the place properties are extra reasonably priced relative to incomes.”
Eased stress exams
Looking ahead, Donnell feels the continued easing of affordability will increase the market additional.
“One large issue limiting house-price inflation is the affect of mortgage rules launched in 2015,” he says. “The loan-to-income circulation restrict has capped shopping for energy for households whereas mortgage stress testing has additionally impacted demand, particularly in areas with above-average costs.
While we’re unlikely to see the double-digit progress of some years in the past, the basics nonetheless assist gradual upward motion
“Lenders have been easing mortgage stress exams in current weeks, delivering homebuyers a 15%–20% increase to borrowing capability for the identical mortgage fee. This will assist gross sales over H2 2025 and into 2026. We don’t require a number of worth inflation to assist house strikes and demand for mortgage credit score.”
Donnell expects house costs to be 2% increased throughout 2025, with above-average beneficial properties in northern areas and below-average will increase down south.
Knight Frank upgraded its 2025 house-price forecast from 2.5% to three.5% in the course of May because of bettering mortgage charges. It has additionally revised upwards its prediction for the following three years, taking its cumulative five-year whole from 19.3% to 22.8% from 2025–29.
Curetons property-buying agent Robin Edwards believes that costs throughout the UK are more likely to stay comparatively flat or present solely modest progress over the following 12 months, between 0% and a couple of% nationally. Further ahead, he foresees annual beneficial properties of between 2% and 4% over the following 5 years.
Lenders have been easing mortgage stress exams in current weeks
Edwards says: “The current stamp responsibility modifications created a short lived flurry of exercise in some areas. However, the long-term impact will probably be a cooling in demand from landlords and second-home consumers, particularly the place yields or capital progress prospects are already tight.
“While we’re unlikely to see the double-digit progress of some years in the past, the basics nonetheless assist gradual upward motion, particularly in areas with robust financial and inhabitants progress. Much will rely on inflation stabilising, rates of interest falling and the continued undersupply of housing.”
Rate path
Although brokers are usually loath to make house-price forecasts in case purchasers depend on them, Bentley Holmes senior mortgage adviser Lloyd Edwards (no relation to Robin) observes: “If rates of interest proceed to fall over the following 12 months and stay regular over the following 5 years, it will give confidence to first-time consumers and residential movers, which is able to increase the variety of transactions and concurrently improve property costs.”
The more durable atmosphere for landlords is having its biggest affect in London, in accordance with each.
One large issue limiting house-price inflation is the affect of mortgage rules launched in 2015
Lloyd Edwards says: “I’m seeing landlords promoting up in London and the Southeast. It is solely not worthwhile with rates of interest at their present ranges except they’ve a low loan-to-value ratio. Additionally, the tax burden on them is punitive.”
Robin Edwards agrees.
“We’re seeing some smaller landlords promoting up, notably within the Southeast and elements of London,” he says, “resulting from tighter regulation, tax modifications and the dearth of potential capital appreciation. Many are switching to restricted firm buildings or exiting the market solely.
“Similarly second-home house owners in some vacationer and coastal areas are promoting resulting from rising council tax premiums and altering attitudes in the direction of vacation lets.”
Zoopla’s figures level to this development with smaller landlords.
Donnell says: “While rental provide has been static, the sector has been professionalising with 50% of properties owned by landlords with the most important portfolios of five-plus properties. Smaller landlords with one or two properties, who didn’t see being a landlord as a enterprise, are promoting up — one in 12 properties for sale on Zoopla is previously rented.
Sellers want to pay attention to the extent of competitors they’re going through for the eye of consumers
“As base charges fall and yields have risen, we anticipate a modest and regular improve in web new funding by landlords with a concentrate on higher-yielding markets outdoors southern England.”
So far evidently stamp responsibility turbulence has been principally mitigated by falling mortgage charges and extra beneficiant multiples. But all eyes might be on the upcoming house-price indices to measure the continuing well being of the market.
This article featured within the June 2025 version of Mortgage Strategy.
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