Steepest monthly increase in house prices recorded this year, fueled by banks providing larger and more affordable mortgage loans
In July 2025, the UK housing market continues to show signs of recovery, with house prices on the rise. The increase is driven by steady income growth, improving housing affordability, and a modest rebound in mortgage rates.
Improved housing affordability has been a significant factor in the market's recovery. Despite earlier challenges, affordability has been improving due to strong income growth outpacing subdued house price growth. The typical UK home price to average income ratio is about 5.75 in mid-2025, which is well below the 6.9 peak in 2022 and the lowest in over a decade. This easing ratio helps potential buyers with deposits and supports demand.
Mortgage market dynamics also play a crucial role. Mortgage approvals remain steady, with June 2025 seeing about 64,200 approvals, near pre-pandemic averages, despite higher interest rates. There is also an improvement in the availability of higher loan-to-value mortgages, which alleviates deposit constraints and supports purchase activity.
Stamp Duty Land Tax (SDLT) adjustments have also had an impact. Changes to stamp duty in April 2025 led to a temporary slowing of house price inflation in April, but subsequent months, including July, have shown a modest price growth rebound. The end of holiday-like SDLT reliefs removed some volatility and normalised transaction volumes.
However, regional disparities exist. While UK-wide house prices increased by 2.4% annually in July 2025, this masks regional variations. For example, Northern England regions like North West and Yorkshire and the Humber reported the highest rate of property price inflation among English regions, with a rise of 4%. On the other hand, London and the south east continue to lag behind, recording 0.5% growth over the year, while the south west saw even lower growth at 0.2%.
Northern Ireland has seen the biggest house price gains, with prices rising by 9.3% over the last year. The North West and Yorkshire and the Humber also reported significant growth, with typical home prices of £242,293 and £215,532 respectively.
As we approach the end of the second half of 2025, many people will be coming off fixed-rate mortgages. Those coming off five-year fixed-rate mortgages may see their repayments spike, while those coming off two-year fixed-rate mortgages may see their payments fall. This could potentially influence market dynamics, with people delaying house moves due to tighter budgets.
The outlook for the rest of 2025 remains uncertain, with experts predicting low single-digit house price growth by the end of the year, but this depends on the autumn Budget. Speculation over tax rises could cause buyers to hesitate after the summer, potentially slowing down the market.
In conclusion, steady wage growth, improved mortgage lending conditions, and the normalisation of stamp duty rules are collectively supporting a modest increase in house prices in the UK in July 2025, despite some regional and monthly price variability.
[1] HM Revenue & Customs. (2025). Stamp Duty Land Tax - latest statistics [2] Nationwide Building Society. (2025). UK House Price Index - July 2025 [3] Office for National Statistics. (2025). House price index, UK: July 2025 [4] Bank of England. (2025). Mortgage approvals for house purchase - June 2025
Real-estate prices in the UK housing market are on the rise in July 2025, driven by improving mortgage rates and steady income growth (Nationwide Building Society, 2025). The availability of higher loan-to-value mortgages and the normalisation of Stamp Duty Land Tax (HM Revenue & Customs, 2025) play crucial roles in the market recovery (Office for National Statistics, 2025). However, regional disparities exist, with Northern England regions showing the highest property price inflation (Office for National Statistics, 2025).
Investors and potential homeowners who are coming off fixed-rate mortgages soon should consider the impact of rising repayments on their financial situation (Bank of England, 2025). The outlook for the rest of 2025 is uncertain, as experts predict low single-digit house price growth (various sources), but it may be influenced by potential tax rises in the autumn Budget.
As the real-estate industry continues to monitor these trends, understanding the various factors affecting mortgage rates, housing affordability, and regional variations remains essential for successful investing and housing market analysis. (Various sources)
