The UK housing market saw an unexpected decline in February, with average house prices falling by 0.1% to £298,602, according to data from Halifax, Britain’s largest mortgage lender.
This follows a record high in January and contradicts analyst forecasts, which had projected a 0.3% increase due to an expected surge in transactions ahead of upcoming stamp duty changes in April.
As reported by The Guardian, economic uncertainty and affordability pressures appear to have influenced buyer behaviour, despite falling mortgage rates and hopes for increased demand.
Revised Data and Market Expectations
January’s house price data has been revised downward, reflecting slower-than-expected growth. Initially reported as a 0.6% increase, the revised figures indicate a more moderate expansion.
The annual growth rate also fell below expectations. Halifax recorded a 2.9% rise year-on-year, compared to the 3.1% forecast by analysts.
Despite the February decline, market conditions remain stable, with house price movements reflecting ongoing adjustments in borrowing costs and government policy changes.
Impact of Mortgage Rates and Stamp Duty Adjustments
The Bank of England lowered its interest rate to 4.5% in early 2025, with financial markets pricing in at least two further 0.25 percentage point cuts by the end of the year. Lower borrowing costs have prompted lenders to offer more competitive mortgage deals.
On Friday, HSBC reduced its standard variable rate by 0.25 percentage points to 6.74%, marking its lowest level in two years. The adjustment benefits homeowners who have transitioned from fixed-term agreements without securing a new mortgage deal.
Changes to stamp duty regulations from 1 April are also influencing the market. The new thresholds include:
- First-time buyers in England and Northern Ireland will receive tax relief on properties up to £300,000, down from £425,000.
- The threshold for a reduced rate will drop from £625,000 to £500,000.
- The zero-tax threshold for all buyers will decrease from £250,000 to £125,000.
Regional Variations and Economic Trends
Despite the national decline, some UK regions reported higher price growth. Northern Ireland led the country with a 5.9% annual increase, followed by Scotland, which saw its fastest growth in 13 months at 3.8%.
In England, Yorkshire and Humberside recorded a 4.1% increase, marking the region’s strongest growth since July 2021. Wales posted an annual increase of 2.8%.
Mortgage data from the Bank of England suggests that demand remains active. Net mortgage lending in January reached its highest level since September 2022, reflecting increased borrowing activity before February’s slowdown.
Comparisons With Other Lenders and Expert Analysis
Halifax’s data contrasts with findings from Nationwide, another major mortgage provider. Nationwide reported a 0.4% increase in house prices for February and 3.9% annual growth, compared to Halifax’s reported 2.9%.
Derren Nathan, senior equity analyst at Hargreaves Lansdown, noted:
“A -0.1% monthly dip recorded by Halifax in itself shouldn’t cause too much concern for housebuilders and mortgage lenders. But digging deeper into the data reveals a more mixed picture. First-time buying activity eased and, looking a little further ahead, changes to the stamp duty regime in April could cause some indigestion.”
Market Stability and Projected Trends for 2025
Despite affordability concerns, Halifax stated that market activity remains at pre-pandemic levels. Amanda Bryden, head of mortgages at Halifax, commented :
“While there’s been talk of a last-minute rush on new mortgages ahead of the changes to stamp duty, inevitably we’ve seen some of the demand that was brought forward start to fade as the April deadline ticks closer, given the time needed to complete a purchase.”
A Reuters poll of economists predicts UK house prices will rise by 3.5% in 2025 and 4% in 2026, with ongoing growth expected at a more moderate pace.
With inflationary pressures easing and two potential rate cuts on the horizon, mortgage affordability could improve. However, the expiration of tax incentives in March may lead to temporary shifts in demand in the second quarter of the year.
