Meta Description: Discover the latest in the UK housing market as price growth slows, and stamp duty changes prompt a potential buyer rush in early 2025. Learn how these changes could impact homebuyers and property transactions.
In October, UK house price growth took a surprising dip, slowing to 2.4% from the 3.2% rate seen in September. This change, reported by Nationwide, marks the third highest annual growth rate since December 2022 but came in slightly lower than expected, as economists had forecast a 2.8% rise for the month. With an average house price of £265,738 in October, prices saw only a 0.1% increase from the previous month, highlighting a cooling trend in the housing market.
Impact of Upcoming Stamp Duty Changes
Anticipated changes to stamp duty rules could lead to a surge in property transactions early next year, according to Nationwide’s Chief Economist, Robert Gardner. The stamp duty threshold adjustments, set to expire in April, may drive buyers to complete purchases before these changes take effect.
Currently, first-time buyers benefit from a nil rate band that excludes them from stamp duty on properties up to £450,000. For additional property buyers, this threshold is set at £250,000. When these temporary increases revert in March, buyers could face higher stamp duty costs, which may push them to close deals quickly. Gardner expects a peak in property transactions in early 2025, followed by a dip later in the year, similar to trends observed after previous changes to stamp duty rules.
Interest Rate Changes and Mortgage Rates
The Bank of England is likely to reduce interest rates from 5% to 4.75% next week, and some banks have already begun adjusting mortgage rates in response. Santander recently lowered rates by 0.36%, while Clydesdale Bank made a 0.20% cut on select products. Meanwhile, Virgin raised rates on certain products after the recent budget announcement.
The Office of Budget Responsibility (OBR) projects that interest rates may rise to 4.5% by 2027. Although lower rates can boost affordability, the forecasted increase may add caution to the market, impacting demand as the years progress.
The Wider Effect of Stamp Duty Adjustments
The upcoming stamp duty changes could impact many homebuyers. Nationwide estimates that about 20% of first-time buyers may feel the impact, and in high-demand regions like Southeast England, that figure could rise to 40%. Additionally, buyers purchasing additional properties will face a higher stamp duty rate of 5%, a recent increase from 3% as of October. This change will likely impact around one in five residential transactions across England and Northern Ireland.
A Look Back at Stamp Duty Holidays
The current stamp duty adjustments resemble the temporary stamp duty holiday introduced during the COVID-19 pandemic, which spurred a wave of property transactions. Gardner suggests that any increase in market activity is likely to be more stable this time around, as buyers have been aware of the expiration date for some time.
Conclusion
The UK housing market is navigating a mix of slowing growth, potential interest rate adjustments, and upcoming stamp duty changes. As mortgage approvals return to pre-pandemic levels, buyers may find this period critical to act before tax changes in April. For those considering a home purchase, these months could be decisive, shaping the property landscape for much of 2025.