Warming up

Nationwide has reported that house prices rose by 2.4% annually in July 2025, a mild increase on the +2.1% seen in June. Monthly house price growth bounced back to +0.6% in July, reversing June’s -0.4% dip that followed the rollback of stamp duty thresholds.

Mortgage approvals rose to 64,200 in June, which was up 900 from the previous month and just shy of the pre-pandemic average of 66,300, when borrowing was cheaper and interest rates more predictable.

This is due in part to more stable interest rates, along with the loosening of affordability tests by major lenders. The encouragement of the Financial Conduct authority has also widened the pool of buyers able to access mortgages.

Cooling interest rates

Despite consumer price inflation coming in above the Bank of England’s target range of 2% to 3% for the third consecutive month in June at 3.6%, the Monetary Policy Committee voted to cut the base rate to 4% last Thursday.

Governor Andrew Bailey described the decision as "finely balanced" driven in part by concerns around domestic economic growth. It is worth noting that the Office for National Statistics has estimated GDP to have fallen by 0.1% in May, following a decrease of 0.3% in April.

The latest UK market activity data from TwentyCi supports this rise in demand, showing that net agreed sales are up by +7% on the same month last year, with the £1 million plus bracket even stronger at +12%. While demand remained positive in London, growth was more subdued, with net agreed sales rising by just under 2%.

Despite this steady growth in activity, the number of properties changing their asking price is continuing to rise. Many are taking longer to sell, reflecting a cautious mood - though being realistic with prices and adjusting accordingly is proving to be the best strategy for most sellers.

This sentiment is more palpable at the very top end of the market in the £5 million plus bracket in London. Here, the number of sales at this price were at their lowest for the first half of a year since the start of the pandemic, with transactions in the six months to June down -8% on the same period the previous year.

Changing tides

Concern around an increased tax burden, specifically targeted at the wealthy, remains a key factor as the Autumn Budget approaches at the end of October. The unwinding of the ‘non-doms’ tax status and the additional stamp duty surcharge for second homes announced in last year’s Budget remains fresh in people’s minds. We explored this in our quarterly prime house price analysis to see how this sentiment has filtered out beyond London.

According to HMRC data, an estimated 94,000 people who earn over £500,000 generate over £50 billion in income tax each year alone. Given this, the chancellor may well be questioning the wisdom of alienating high net worth individuals.

It has been briefed that the Treasury may review exposing ‘non-doms’ to inheritance tax on their global assets. Some cabinet ministers, including business secretary Jonathan Reynolds, have been at pains to rule out a so-called ‘wealth tax’ despite senior Labour figures calling for one. Rachel Reeves herself has also stated that she believes the government “has got the balance right” on the taxation of “those with the broadest shoulders”.

Many MPs are enjoying their own summer break, and we will most likely have to wait until the end of conference season in October to see how the fiscal black hole will be plugged – as well as what the impact will be for the prime housing markets in particular.

Temperature check

Turning to the rental market, data from Homelet’s rental price index revealed that average rents across the UK grew by only 0.4% on both a monthly and annual basis. London saw muted quarterly growth at 0.2%, while experiencing a fall of -0.9% annually.

Elsewhere, Lucian Cook and Amelia Greene recently thrashed out how the biggest shake-up in rental regulation in over a generation might impact landlords and what it means for the sector’s future structure. Do give it a read.