The UK housing market has entered 2025 with renewed momentum, defying affordability concerns and economic uncertainties. A 0.7 percent rise in January has propelled the average property price to a record £299,138, a swift recovery from December's slight dip. However, annual growth has softened to 3.0 percent, signalling a potential moderation in price acceleration.

Northern Ireland retains its lead in house price growth, though its rate has slowed to 5.9 percent from 7.3 percent, reflecting broader trends of easing inflation across the UK's regions. The North East of England has emerged as the country's strongest-growing region, overtaking the North West, while London remains the most expensive with an average price of £548,288.

Despite high mortgage rates hovering between 4 percent to 5 percent, strong demand persists, possibly spurred by buyers rushing to beat the anticipated stamp duty increase. The Bank of England's base rate cut may further stimulate activity, especially if inflation continues to decline and earnings outpace living costs.

Yet, the fundamental challenge remains supply. The lack of available housing stock is expected to sustain moderate price growth through 2025, keeping the market in a delicate balance between affordability pressures and long-term demand. The latest update leaves the RPI and RPI-P at minus 19, meaning that economic activities are well behind expectations.

The Halifax House Price Index (HPI) is the UK's longest running monthly house price measure with data covering the whole country going back to January 1983. The index is based on the largest monthly sample of mortgage data, typically covering around 15,000 house purchases per month, and covers the whole calendar month. In March 2016 Markit announced that it would be acquiring the Halifax HPI from Lloyds Banking Group. Halifax continues to publish the index on behalf of Markit and both the name and the basic methodology remain unchanged. However, in May 2020, the annual growth measure was changed from the average of the last three months to just the latest month.

Home values affect much in the economy - especially the housing and consumer sectors. Periods of rising home values encourage new construction while periods of soft home prices can damp housing starts. Changes in home values play key roles in consumer spending and in consumer financial health. During the first half of this decade sharply rising home prices boosted how much home equity households held. In turn, this increased consumers' ability to spend, based on wealth effects and from being able to draw upon expanding home equity lines of credit.