UK house prices experienced a notable increase of 3.5% year-on-year in May 2025, marking a strong recovery from April’s slight decline. The growth exceeded economists’ expectations, with a monthly rise of 0.5%, the largest increase since December 2024. This rebound reflects the underlying strength in the housing market, despite broader economic challenges.
Nationwide’s Chief Economist, Robert Gardner, highlighted that low unemployment rates, wages outpacing inflation, and expectations of further interest rate cuts by the Bank of England have created a supportive environment for housing demand. These economic fundamentals have helped boost confidence in the property market, making housing more affordable for potential buyers, even as inflationary pressures continue to affect other sectors.
Despite the positive growth, the market faces challenges. Mortgage approvals for April 2025 fell to their lowest levels since February 2024, as buyers rushed to complete transactions before the expiry of a temporary stamp duty land tax exemption. This surge in activity led to a sharp drop in net mortgage lending, which fell by £759 million in April, marking the largest decline since January 2024.
Looking forward, analysts predict a 3.5% rise in house prices for the year, driven by steady borrowing costs and ongoing housing supply shortages. While challenges remain, the housing market’s resilience suggests that the outlook for 2025 remains positive, supported by strong economic fundamentals and growing buyer confidence.
The latest figures underscore the continued demand in the housing sector and indicate that despite uncertainties, the market remains a solid investment as the UK navigates its post-pandemic economic recovery.
