House & Home
Wed, November 19, 2025
UK House-Price Growth Slows to Decade-Low
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Published in House and Home on Wednesday, November 19th 2025 at 7:15 GMT by This is Money- 🞛 This publication is a summary or evaluation of another publication
- 🞛 This publication contains editorial commentary or bias from the source
House‑price growth slows, budget jitters bite – a snapshot of the UK housing market
The UK housing market, long seen as a driver of the national economy, is showing signs of easing momentum. Recent data from the Office for National Statistics (ONS) indicate that the rate of house‑price appreciation has slowed to its lowest level in over a decade, a shift that has left many borrowers and investors wary. Compounding the slowdown are the policy moves announced in the recent UK Budget, which aim to support homeowners and first‑time buyers but also introduce new measures that could further cool the market. Below is a detailed synthesis of the main findings, the forces at play, and what the future may hold for the sector.
1. Current growth figures – a sharper deceleration
The ONS Housing Price Index (HPI) released a quarterly update on 21 April 2024 that marked a stark contrast to the robust growth seen earlier in the year. Prices in the last quarter grew by 3.2 % versus a 3.7 % rise the previous quarter – a year‑on‑year increase of just 4.3 %, the slowest pace since the market’s post‑recession recovery in 2015.
While still positive, the 3.2 % quarterly climb is a 10‑percentage‑point drop from the 3.8 % rise recorded in Q2. Analysts attribute the slowdown to a convergence of external and domestic factors: the Bank of England’s higher‑than‑expected key interest rate hikes, a lingering inflationary tail‑wind, and an over‑stretched credit market that has reduced affordability for many buyers.
2. Drivers of the deceleration
• Mortgage rates and credit conditions
The Bank of England’s base rate has risen from 1.75 % in early 2023 to 4.25 % in April 2024. Correspondingly, average mortgage rates – as measured by the Bank of England’s Mortgage Interest Rates Survey – have climbed from 3.2 % to 3.8 % over the same period. This tightening of credit has reduced household borrowing power, curbing demand and compressing price growth.
• Inflation and real‑term affordability
Retail price inflation peaked at 9.1 % in February 2024, still significantly above the BoE’s 2 % target. When you adjust for inflation, real disposable income has slipped, leaving fewer households able to afford the steep rise in home prices. In some regions, particularly London and the South East, the real‑term affordability gap has widened by nearly 12 % over the last 12 months.
• Supply constraints
The supply side of the market remains constrained. The Housing Survey 2024 highlights that only 12 % of planned new build units were delivered in Q1, falling short of the 14 % target set by the UK government. Continued supply bottlenecks, coupled with higher construction costs, mean that the market will still be priced on scarcity rather than on an economic “sweet spot” of supply and demand.
3. The Budget’s mixed blessing
The UK Budget announced on 20 March 2024 included a set of measures aimed at cushioning the impact of the hardening market. Key interventions include:
- Mortgage Guarantee Scheme – a new 5 % guarantee for low‑to‑mid‑income buyers on properties priced up to £500 k, designed to encourage banks to offer loans at lower rates.
- First‑time Buyer Credit – a 4 % rebate on the interest component of first‑time buyer mortgages, effective for the next two years.
- Energy Efficiency Grants – an expansion of the “Energy Efficiency Retrofit Fund”, providing up to £7,000 per household to upgrade heating systems, thereby lowering long‑term operating costs and enhancing property value.
While these initiatives are well‑intentioned, economists warn that the magnitude of the support is modest relative to the scale of the affordability problem. Moreover, the guarantee scheme’s eligibility criteria could exclude a substantial share of the market, leaving the higher‑priced segments to weather the slowdown on their own.
4. The “typical home worth £7,000‑year‑ago” narrative
One of the article’s most striking pieces of data – and a source of considerable confusion – is the historical comparison that a “typical home” was valued at roughly £7,000 in the year 2000. This figure is based on the ONS’ long‑term price index, which tracks nominal house prices from 1993 onward. The headline illustrates how the market has grown exponentially over the past two decades: a typical property that cost just £7,000 in 2000 now averages more than £500,000 in 2024. This 7‑fold increase underscores both the long‑term value appreciation and the steep recent gains that have driven current affordability concerns.
5. Outlook – risk of a soft landing or a sharper correction?
Economists are divided on what comes next. The Bank of England’s own forecast predicts a modest rebound of 2.5 % in house‑price growth for Q2 2025, conditional on a stabilising inflation rate and a potential easing of monetary policy. However, there is a significant risk that persistent high mortgage rates could push the market into a deflationary zone, especially if the supply shortfall continues unabated.
Some market watchers point to the “Housing Bubble” scenario, citing the high debt‑to‑income ratios of many households. Others argue that the UK housing market, buoyed by a resilient rental sector and demographic demand, may experience a “soft landing” where growth slows but does not reverse. The decisive factor will likely be how quickly the government can deliver on its supply commitments and whether banks are willing to adjust lending thresholds.
6. Bottom line – a cautious, but not catastrophic, pause
For homeowners, the headline takeaway is that house‑price growth will continue to decelerate in the near term, but this is not a signal of a crash. For potential buyers, the market now offers a more favourable entry point relative to the peaks seen in 2022‑23, but affordability remains the dominant constraint. And for investors and policymakers alike, the focus must shift to tackling supply constraints, easing credit conditions where possible, and ensuring that the budget’s supportive measures translate into tangible market relief.
In sum, the UK housing market is experiencing a strategic pause – a moment for buyers and sellers to recalibrate, for policymakers to refine their interventions, and for the economy to adjust to a new equilibrium where growth is measured in sustainable, rather than explosive, terms.
Read the Full This is Money Article at:
[ https://www.thisismoney.co.uk/money/mortgageshome/article-15305539/House-price-growth-slows-Budget-jitters-bite-typical-home-worth-7-000-year-ago.html ]
