The Nationwide claims that higher rents are now preventing some tenants from saving sufficiently to afford deposits to buy their first homes.

In its latest housing market snapshot, looking at 12 months of successive gentle price growth, the lender says: “Mortgage market activity and house prices proved surprisingly resilient in 2024 given the ongoing affordability challenges facing potential buyers. At the start of the year, house prices remained high relative to average earnings, which meant that the deposit hurdle remained high for prospective first-time buyers. 

“This is a challenge that had been made worse by record rates of rental growth in recent years, which has hampered the ability of many in the private rented sector to save.”

Overall, the Nationwide says the market is starting 2025 relatively strongly – but with some volatility ahead.

Average prices across the UK are up 4.7% over the preceding 12 months.

Northern regions saw higher price growth than southern regions, with Northern Ireland actually being the best performing area for second year running, with prices up 7.1% over 2024.  East Anglia was the weakest performing region, with prices up 0.5% over the year.

But there’s a warning of a rocky up-and-down year ahead for the market. 

Nationwide chief economist Robert Gardner says: “Upcoming changes to stamp duty are likely to generate volatility, as buyers bring forward their purchases to avoid the additional tax. This will lead to a jump in transactions in the first three months of 2025 (especially in March) and a corresponding period of weakness in the following three to six months, as occurred in the wake of previous stamp duty changes. 

“This will make it more difficult to discern the underlying strength of the market.

“But, providing the economy continues to recover steadily, as we expect, the underlying pace of housing market activity is likely to continue to strengthen gradually as affordability constraints ease through a combination of modestly lower interest rates and earnings outpacing house price growth. 

“The latter is likely to return to the 2% to 4% range in 2025 once stamp duty related volatility subsides.”