In March 2025, the UK housing market experienced notable fluctuations, influenced by impending stamp duty changes and evolving lending practices aimed at assisting first-time buyers.
House Prices Experience Volatility Amid Stamp Duty Changes
The average UK house price fell by 0.5% in March 2025, reaching £296,699, marking the sharpest monthly decline in a year. This downturn follows a 0.2% dip in February and is attributed to a surge in home purchases in January, as buyers rushed to complete transactions before the April reduction in stamp duty thresholds. The revised regulations lowered the zero-tax threshold from £250,000 to £125,000 and reduced the first-time buyer exemption threshold from £425,000 to £300,000. Economists predict that despite the current slowdown, house prices may rise later in 2025 due to constrained supply and stable demand.
Lenders Ease Affordability Rules to Support First-Time Buyers
In response to the challenges posed by rising house prices and higher living costs, major UK mortgage lenders, including Santander, have adjusted their affordability criteria to facilitate homeownership for first-time buyers. These changes allow customers to borrow between £10,000 and £35,000 more than previously possible. For instance, a couple earning nearly £50,000 annually can now borrow £210,000, up from £196,000, for a £260,000 property. Similarly, a family with an income of £63,500 may secure a £305,000 loan for a £425,000 home, an increase from £284,000. These adjustments follow the Financial Conduct Authority’s encouragement for lenders to ease affordability stress tests that may have been overly restrictive. While these measures aim to widen access to homeownership, concerns remain about the potential risks of overborrowing, reminiscent of the 2007-08 financial crisis.
Record High Lending to First-Time Buyers
The share of mortgage lending to UK first-time buyers reached a record high of 29.6% in the final quarter of 2024. This increase is partly due to buying property becoming more affordable than renting, coupled with a rise in landlords exiting the market. Analysts attribute this trend to rents rising faster than house prices over the past two years and a drop in mortgage rates since 2023. As a result, buying has become cheaper than renting across the UK, supporting first-time buyer demand.
These developments highlight the dynamic nature of the UK housing market, with policy changes and lending practices significantly impacting both house prices and the accessibility of homeownership for first-time buyers.