Economic headwinds and tariff uncertainty could weigh on short-term buyer sentiment
House price growth across the UK is losing steam, with more properties for sale giving buyers greater choice and keeping prices stable, according to the latest analysis from Zoopla.
Average house prices rose by 1.6% in the year to March 2025, down from 1.9% at the end of 2024. Despite the slowdown, price growth remains above the 0.2% rate seen a year earlier. The average home now costs £268,000, an annual increase of £4,270.
Demand for homes started strong in early 2025, boosted by the looming end of Stamp Duty relief in England and Northern Ireland. However, recent weeks have seen a slowdown, with demand levels now matching those of a year ago.
“The weakening in buyer demand is partly seasonal, reflecting the Easter holidays, while global events and uncertainty over the economic impact of tariffs are likely to be causing hesitation among some buyers,” said Richard Donnell (pictured), executive director of research at Zoopla.
Despite the cooling demand, sales agreed are up 6% compared to this time last year. A key factor is the rise in the number of homes on the market. Listings have jumped 15% over the past month compared to a year earlier. The typical estate agent now has 34 properties on offer, up from 31 a year ago and well above the 2022 low point of 15 during the pandemic boom.
“Improved two-year mortgage products, greater borrowing power and sustained confidence are all playing key roles in helping raise the number of homes for sale and boost overall momentum within the housing market,” said Toby Leek, president of industry body NAEA Propertymark.
“Alongside the fact that the spring and summer months are proven to be historically busier times of the year, many of those who are waiting in the wings due to riding out current global economic uncertainty and the continued journey in interest rates cooling may be finding it difficult to resist the broad range of properties available coupled with their improved financial status.”
Price growth is slowing across all UK regions but still sits higher than 12 months ago. Sales agreed are up everywhere, with Wales (14%), the North West (10%) and the North East (10%) seeing the biggest gains.
Southern England, where affordability remains stretched, continues to record price growth below 1%. By contrast, prices are climbing by 2.2% to 3% in the West Midlands, northern England, Wales and Scotland. Northern Ireland stands out with a 6% annual rise.
Zoopla predicts that market activity will largely mirror 2024 levels, although uncertainty over the economic fallout from tariffs could temper buyer enthusiasm in the short term.
Donnell pointed out that “current expectations are that the Bank of England may have scope to further lower the UK base rate this year,” a move that would help keep fixed mortgage rates in the 4% to 5% range.
Wage growth, currently running at 5.6%, is outpacing inflation, offering some support for homebuyer confidence even as economic growth forecasts weaken.
In a trend that could aid housing activity, lenders are starting to ease affordability stress testing. Currently, many lenders test whether borrowers can afford repayments at rates as high as 8-9%, well above today’s average mortgage rates of around 4.5%.
“If average mortgage stress rates were to return to pre-2022 levels of 6.5% to 7%, this would deliver a 15-20% boost to buying power,” Donnell explained.
For example, a first-time buyer paying £1,020 a month at a 4.5% rate must currently show they can afford £1,550 a month at the higher stress rate. If stress tests ease, that requirement would drop to £1,275, making mortgages accessible to more buyers.
Zoopla stressed that while this change could drive more sales and help clear stock, it is unlikely to fuel significant house price inflation due to other lending restrictions remaining in place.
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