Planned increases to stamp duty meant house price growth cooled in April, prompting questions about the future trajectory of the UK housing market as interest rates fall and global economic disruption forces prospective buyers to reassess their plans.
“US trade policy developments have significantly dented UK consumer confidence, presenting a near-term headwind to UK house prices,” says Morningstar international economist Grant Slade.
According to the latest Nationwide House Price Index data, the annual rate of house price growth slowed to 3.4% in April, down from 3.9% in March. Month on month, house prices are down 0.6%.
The UK’s housing market is at a crossroads. On May 8, traders and investors expect interest rates to fall, which would logically stimulate demand with cheaper borrowing in prospect. Some lenders are already offering attractive sub-4% deals to prospective buyers in a bid to gain custom. Something of a mini-price war has broken out.
Simultaneously, a period of attractive stamp duty relief has ended, forcing prospective buyers to pay more when they buy homes. Other factors are also in the mix, however.
“The softer market reflects the increase in stamp duty bills from Apr 1, with some buyers reconsidering their options in the face of higher purchase costs, along with the traditional Spring surge in listings, which can help to keep a lid on prices,” says Alice Haine, personal finance analyst at Bestinvest.
“A spike in the number of homes for sale is typical for this time of year as buyers look to take advantage of improving temperatures and longer daylight hours to showcase their interiors and gardens.
“While more homes for sale gives buyers greater choice, the uptick in listings is not being met by a similar uplift in demand. This is a result of the seasonal slowdown that typically occurs over the Easter period, when buying activity gets put on the backburner as people head off on holiday, and buyers erring on the side of caution in the face of fresh affordability challenges.”
Mortgage Affordability Is Improving
The good news for homeowners looking to sell is the scarcity of housing overall acts as a natural stimulus to demand. The good news for prospective buyers is affordability of borrowing is easing slightly, potentially improving their bargaining position.
In the UK, mortgage rates are falling in anticipation of rate cuts from the Bank of England. According to Rightmove data from May 1, 2025, the lowest rates for two-year and five-year fixed deals are 3.75% and 3.83%, respectively.
This is much lower than the Bank rate of 4.5%, which is expected to fall by at least 25 basis points on Thursday. Around the start of the year, mortgage rates were hovering around 4%.
Floating rate or tracker mortgages follow the Bank of England’s base rate closely, while fixed-rate mortgages follow SONIA, or the Daily Sterling Overnight Index Average, a swap rate published by the Bank too.
These swap rates are linked closely with gilt yields, which have been volatile this year. At the start of 2025, gilt yields spiked as investors sold off UK government debt, and that pushed fixed-rate mortgage products higher. Yields have since retraced since the Spring Statement and the tariff turmoil.
Morningstar’s Slade sees a direct link between the housing market weakness and what’s going on in the bond markets.
“UK house price growth has cooled following the rise in gilt yields in late 2024,” he says.
Inflation data also suggests housing costs are still rising, but at a slower rate than before. The consumer prices index (CPI) is usually cited as a basic measure of price rises. CPIH, a measure of inflation that includes housing costs, also shows inflation rising at 3.4% annually, down from 3.7% in February.
The overall effect is a slight easing in housing costs and the affordability of the debt required to fund house purchases. Elsewhere, the UK still has a housing crisis, in which shortages in affordable and social housing buoy prices overall. Economists call this a “supply-side” issue.
UK Economic Uncertainty Helps Buyers
One effect of the uncertainty currently feared by savers and investors is prospective homeowners can be sure that they stand to get a better deal if they negotiate on price.
“During periods of change and uncertainty, it’s natural for homebuyers to weigh up the cost of owning a property more carefully,” Haine says.
“Negotiating harder on price is one way to improve an affordability position and securing a lower mortgage rate is another.”
For potential buyers rethinking their approach, then, it might be worth considering bargaining more aggressively over price – particularly if stamp duty costs are now higher.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.
