Key Takeaways
- One survey shows a fall in house prices in July, but official data is still pending.
- Mortgage affordability expected to improve as interest rates are cut in August.
- UK economy remains weak but tariff uncertainty is starting to recede.
Deep in the middle of the summer selling season, the UK housing market is showing signs of slowing down. On some measures, house prices fell in July, while the number of properties for sale is at a decade high.
The wider backdrop is a weakening domestic economy, with recession potentially looming, and elevated interest rates, which are reducing mortgage availability.
Experts are now revising downward their estimates for house price growth in 2025. Estate agent Savills now forecasts average UK house price growth in 2025 to be just 1%, down from the 4% prediction it made in November 2024. Nevertheless, has revised upward its forecast for the next five years, where it expects growth of 24.5% over the period.
“The housing market has been stagnant for much of this year, with developers, investors, and consumers adopting a cautious ‘wait and see’ approach,” says Daniel Austin, chief executive of property lender Ask Partners, in a letter earlier this month to the chancellor, Rachel Reeves, urging the government to intervene to stimulate the market.
What Is UK House Price Data Showing?
UK house prices have risen sharply over the decades as demand has outstripped supply and the low interest rate environment made borrowing more affordable. That trend has shifted, but the consensus on whether home prices are falling or simply seeing much smaller gains is mixed.
The most comprehensive—and accurate—house price data comes from the Office for National Statistics. This official measure takes in actual transaction prices rather than mortgages or sale prices. However, compared to some data sources there is a time lag in the data.
According to the latest ONS data released in July, the average price of a home in the UK in May 2025 was £269,000, up from the £266,000 recorded in April, but down from the £273,000 recorded in March. This average price is slightly lower than the market peak of £266,000 recorded in 2022 in the wake of the pandemic.
More timely information on the housing market comes from lenders like Nationwide and Halifax, as well as online estate agents including Zoopla and Rightmove. On July 21, Rightmove said the average price of a UK home for sale in July fell by 1.2%, when compared to June. It’s the biggest July fall in house prices in two decades.
Mortgage Costs Expected to Fall
A key question for the UK housing market, of course, is the path for interest rates.
The Bank of England has cut interest rates from the recent peak of 5.25% to 4.25%, and is expected to cut in August when it next meets, taking the base rate to 4%.
Some lenders are already offering sub-4% deals in anticipation of falling rates, but it’s the small print that really matters. Product fees and policy lengths vary. Purchasers may find better deals are only available for shorter terms.
In addition, thousands of existing homeowners are still due to remortgage when their existing fixed-rate deals come to an end in the coming months, so they will inevitably be paying more as their policies catch up with the “higher for longer” rates environment.
This is known as the mortgage lag and could tip the balance away from moving up the housing ladder in favor of paying off existing debt. Combined with fears over the economy and jobs, this is likely to make homeowners cautious.
Where Next for UK House Prices in 2025?
Morningstar international economist Grant Slade thinks the outlook for the market is brighter for the second half of the year, especially with tariff trade war fears now receding and more interest rates cut ahead.
“UK house prices contracted meaningfully in April, responding to the marked rise in uncertainty in the immediate aftermath of Trump’s “tariff announcements,” he says.
“In the time since, the uncertainty surrounding the economy has receded, boding well for house prices. More recent data on asking prices for UK real estate may suggest that summer selling conditions are a touch soft.
“Still, we think the economic environment remains broadly supportive of UK house prices, with labour market conditions softening gradually, while expected monetary easing in the second half of 2025 is likely to prove beneficial.”
