House prices surge: what it means for buyers

House prices have risen at the fastest rate in nearly two years, research by Nationwide has found.

At a time when many households are struggling financially, this has come as a surprise for many experts.

In November, the annual growth rate of house prices jumped to 3.7%, a significant increase from the previous month's 2.4%. This is the highest growth rate since this time last year.

The average price of homes bought through Nationwide now stands at £268,144, just shy of record highs. The previous record was reached in the summer of 2022, due to low interest rates and a rush for homes after the Covid lockdowns.

Why have house prises gone up?

Despite rising interest rates for borrowers, demand for homes appears to be holding steady. Robert Gardner, Nationwide’s chief economist, says this could be down to:

• low unemployment rates and decent income growth, even after accounting for inflation
• household debt levels being their lowest (relative to income) since the mid-2000s, which may be providing some cushioning for buyers

Homebuyers in England and Northern Ireland face higher costs from April 2025 as the temporary stamp duty tax cut comes to an end.

From April, buyers will pay stamp duty on properties worth more than £125,000, instead of the current threshold of £250,000. First-time buyers will also face higher costs, with the stamp duty threshold dropping from £425,000 to £300,000.

The government says these changes will boost the housing market, although some analysts believe they may have contributed to the recent soaring prices.

It’s possible house sales will surge in the first quarter of 2025 as buyers rush to complete purchases before the deadline. After that, the market will likely quieten down.

The impact on affordability

Many people still can’t afford to buy, even though unemployment rates are low and wages are going up.

That’s because, by historical standards, house prices are still high compared to income.

But some experts predict mortgage lenders might drop the interest rates they offer to try Watch this space!