The UK Housing Market Shows Remarkable Resilience – What Bank of England Data Reveals About Your Financial Future
The Bank of England’s most recent Systemic Risk Survey sheds light on an increasingly resilient UK housing market. Despite substantial economic headwinds and global uncertainties, the data points to a property sector that remains stable, active, and grounded in strong financial fundamentals. For clients of accountancy firms such as Cutts & Co, this offers critical insights that go beyond property headlines.
This post explores the various ways in which the UK housing market continues to demonstrate strength. From the perspectives of investor confidence and transaction momentum to price performance and regional variations, we detail the market’s core dynamics and explain what they mean for financial planning, wealth management and business operations.
Confidence in Financial Systems Reflects in Market Stability
The Bank of England’s biannual Systemic Risk Survey captures the perceptions of senior executives across major financial institutions. The August 2025 survey revealed that 95 percent of respondents felt confident in the UK’s financial architecture over the coming three years. This includes 37 percent who were “very confident” and 58 percent feeling “fairly confident” about system stability.
Such widespread confidence, particularly given global political and economic strains, reflects genuine institutional belief in the UK financial system. This confidence also fuels ongoing capital allocations across various sectors, including property, which supports consistent lending activity and mortgage availability.
Notably, only five percent of survey respondents expressed limited confidence in financial stability — down from eight percent earlier in the year. Nowhere within the surveyed group was there a complete lack of confidence, delivering a reassuring message to stakeholders in British real estate and finance.
Transaction Volumes Rising Consistently
A further indicator of market health is activity. When transaction volumes remain consistent, and even increase, under uncertain economic conditions, this suggests a housing market that remains functional and liquid.
The figures from September 2025 tell a strong story. Seasonally adjusted residential property transactions totalled nearly 96,000 — a four percent rise compared to the same month last year. The raw, unadjusted figure was higher still, exceeding 102,000 transactions, which marks an impressive eight percent annual increase.
These are not isolated data points. Monthly comparisons also show a continued upward trend, with September’s activity exceeding August’s by one percent. Moreover, on a year-to-date basis, 2025 has seen transactions up seventeen percent over the same period in 2024. This rise not only reflects the temporary surge linked to changes in stamp duty thresholds but also highlights a sustained appetite for property transactions well into the year.
Stabilising House Prices and Moderate Growth
Whereas transaction volumes generate liquidity, house prices underscore sentiment and value. Rather than the boom-and-bust cycles feared during periods of economic uncertainty, the latest data points to steady and moderate appreciation.
In August 2025, the UK average house price stood at £273,000 — a three percent increase on the previous year. Regional and platform-specific data offer supporting evidence. Halifax reported a more conservative -0.3 percent annual price shift in September, with the average price sitting just below £298,200. Meanwhile, Rightmove’s data for October indicated that average asking prices stood at approximately £371,400 — essentially unchanged from a year earlier.
The stability of these figures provides clarity. The double-digit surges seen during the pandemic period have figuratively given way to a market finding its equilibrium. This flat or gently rising profile reflects the balancing act between muted demand due to affordability constraints and ongoing supply limitations in many regions.
Crucially, there is no indication of freefalling prices, nor is there evidence of overheating. This suggests a market performing in line with broader macroeconomic trends — healthy, albeit cautious.
Regional Divergence and Inter-Market Efficiency
One of the more instructive trends emerging from housing data is regional divergence. Northern regions — such as the North East and North West — have outperformed parts of southern England, including Greater London, in terms of annual price growth.
In the North East, house prices grew by 6.6 percent year-on-year, with the North West posting growth of 4.5 percent. Comparatively, London saw a 0.3 percent annual drop in average prices, while the South East experienced minimal growth of 1.8 percent.
This disparity tells a twofold story. On the one hand, it highlights the appeal of relatively affordable northern markets which offer better value, particularly for first-time buyers or investors seeking yield. On the other, it signals cooling in high-value locations due to affordability pressures, tax reform speculation and saturated pricing.
Rather than alarming, such variation is hallmarked by market maturity. The UK housing ecosystem is functioning logically — flowing capital and demand to areas of perceived value while gradually normalising prices in overheated regions. For property professionals and prospective buyers, it underlines the importance of localised strategy rather than broad generalisations.
Interest Rate Environment – Borrowing Costs Easing
The Bank of England’s base rate currently stands at four percent, reduced from the 5.25 percent peak reached back in 2023. This easing trajectory signals improved inflation control and a willingness to stimulate cautious borrowing.
This shift is already reflected in commercial mortgage products. As of November 2025, two-year fixed rate mortgages are available from around 3.8 percent, with five-year fixed terms averaging roughly 5.6 percent. Although these rates are still above pandemic-era lows, they are significantly down from the highs seen in early 2025.
The UK’s preference for fixed-rate mortgage arrangements creates a “lock-in” effect, where homeowners are less incentivised to sell and swap mortgages when rates rise. As borrowing costs fall, this could gradually reverse, encouraging more households to transact — a positive outlook for overall market turnover.
The prospect of further cuts in the Bank’s base rate adds extra dynamism. Although not guaranteed, financial markets currently predict a strong probability of additional reductions before the close of 2025. This environment encourages prospective buyers to enter the market while also lending assurance to lenders and developers alike.
Affordability Continues to Challenge First-Time Buyers
While headline numbers portray a stable market, affordability issues continue to hamper market access — particularly for younger buyers. According to the latest available data, the average age of a first-time UK homebuyer now stands at thirty-five. This is notably higher than past decades and reflects wider socio-economic shifts.
A typical first-time buyer contributes a six percent deposit, equivalent to just over £8,000. While many save independently, a significant proportion — nearly one third — rely on parental financial assistance to afford this entry cost.
A broader structural concern arises from the price-to-income ratio. While once around 4.5 in the post-war years, UK house prices now average approximately nine times the average salary. It’s clear that, for many, salary growth has not kept pace with house price inflation.
Nevertheless, despite these pressures, the housing market has adjusted through longer mortgage terms, higher LTV (loan-to-value) arrangements, intergenerational wealth transfer, and buyer migration to more affordable areas. These coping mechanisms, though not a cure for systemic affordability, indicate adaptability and ongoing transactional flow.
Steady Gain in Housing Supply
One major source of long-term optimism lies on the supply side. Although the UK has historically underbuilt compared with demand, recent figures suggest gradual progress.
In England alone, just under 197,000 net additional homes were delivered in the year leading up to March 2025. While still shy of government targets (approx. 370,000 per annum), this figure represents meaningful growth.
Construction starts have also risen. In the second quarter of 2025, over 29,000 new housing units commenced development — up sixteen percent on the previous year. This is a critical precondition for future affordability improvements and housing quality evolution.
The Build-to-Rent sector is particularly pivotal. Though new starts have slightly retreated, project completions remain high, indicating a shift from development to occupancy. Government support for this niche – including funding via a National Housing Bank and targeted development incentives – is likely to sustain its importance.
Household and Corporate Financial Resilience
A strong housing market cannot exist in a vacuum — it requires supportive household and business conditions. The Bank of England reports improved balance sheets across both segments.
At the household level, the debt-to-income ratio is now at its lowest point since 2001. This arises partly from moderate wage gains and disciplined borrowing habits. Employment levels remain robust, and sectors such as health and logistics continue to drive job creation.
For businesses, resilience is similarly evident. Debt service burdens have eased and profitability metrics, outside of more volatile sectors like commercial real estate, remain strong. This underpins confidence not only in residential investment but also in mixed-use developments and supporting infrastructure.
Policy Uncertainty and High-End Market Caution
One notable caveat to resilience in the housing market is policy uncertainty — especially around taxation. With several tax policy changes rumoured ahead of the November 2025 Autumn Budget, some segments of the market have cooled.
High-value residences (i.e. those exceeding £500,000) are particularly vulnerable in this environment. Reports suggest an 11 percent fall in buyer demand within this segment in advance of the Budget announcement, alongside a nine percent decline in new listings.
Despite this, broader market performance remains unaffected. The mainstream property market — particularly homes below higher-rate tax thresholds — continues to move at pace. Post-Budget clarity, when it arrives, is likely to spur renewed interest and create another wave of transactional activity.
Rental Sector Continues to Provide Yield and Stability
The UK rental market, closely linked with home ownership trends, remains robust. Annual rental growth reached just under six percent by mid-2025 – a decline from prior highs but still indicative of firm demand.
Tenant competition for properties remains high, with Rightmove reporting an average of eleven enquiries per listing. Supply has increased marginally, but remains insufficient in many towns and cities.
For investors, this presents viable yield opportunities — particularly as buy-to-let lending becomes more stable and tenants commit to
