UK House Prices Rebound Gently in July as Affordability Hits a Decade Low Ratio

1 August 2025

hotographer: Darren Staples/Bloomberg

British house prices returned to growth in July 2025, rising 0.6 percent from June to reach an average value of £272,664 according to Nationwide Building Society data . The monthly increase reverses a 0.9 percent drop in June, which followed the end of a stamp duty holiday in April that had the housing market trending downward. Annual price growth accelerated to 2.4 percent, up from 2.1 percent.

The reasons are clear: wage growth continues to outpace inflation and home price rises, moderating the long-term affordability burden. Nationwide’s chief economist, Robert Gardner, notes that the average house price now stands at roughly 5.75 times average household income. That is the lowest ratio recorded in over a decade, down from a 6.9 peak in 2022.

Mortgage rates have also eased, contributing to the improved picture. The typical rate for a five-year fixed mortgage with a 25 percent deposit now sits at approximately 4.3 percent, down from the 5.7 percent level seen in late 2023. This decline coincides with broader concessions from lenders, including relaxed affordability assessments and the reintroduction of high loan‑to‑value products, helping to bring more buyers into the market.

Mortgage approval data supports the narrative of a stable recovery. In June lenders approved around 64,200 mortgages a rebound from May and consistent with a return to pre-pandemic levels of activity. Consumer borrowing also climbed, pointing to renewed confidence among buyers amidst improved conditions.

The market’s modest recovery comes with an expected hold in price growth compared to early 2025 when tax incentives spurred front-loaded transactions. Today’s 2.4 percent annual rise contrasts with the 4.7 percent peak recorded in December 2024.

Looking ahead, the Bank of England is widely expected to cut its base rate from the current 4.25 percent to around 4 percent during the August 7 monetary policy meeting. Yet elevated inflation climbing toward 3.6 percent suggests policymakers may proceed with caution before enacting further reductions.

Market analysts are expressing cautious optimism: with stronger incomes, less aggressive price rises, and lower borrowing costs, the fundamentals are aligning for potential growth in the housing sector through late 2025. Still, this depends on broader economic stability and a sustained easing of interest rates.

The current housing landscape reflects careful recalibration rather than overheating. Supply has returned as sellers act amid competitive pricing; demand remains firm but selective. Mortgage affordability adjustments have helped, but credit conditions remain tighter than pre-pandemic standards.

In sum, the UK market is settling into a cautious equilibrium where buyers hold more leverage and sellers price realistically. Continued wage growth, modest inflation, and potential rate cuts may further support demand through the coming months.