The Office for National Statistics (ONS) has reported that UK house prices rose 3.7% year-on-year in June, marking an acceleration from 2.7% annual growth in May. Despite the increase, analysts say the market remains in a period of adjustment, with both prices and rents showing signs of cooling after a surge earlier this year.
House Prices Rebound After May Slowdown
The ONS noted that annual house price inflation had peaked at 5.5% in March 2025, fuelled by a wave of transactions ahead of the expiry of a stamp duty discount in April. Following a slowdown in May, June’s figures reflect renewed resilience in demand, supported by easing mortgage rates and improving affordability in certain regions.
At the national level, average values are now broadly in line with other indices published by lenders such as Halifax and Nationwide, which also recorded moderate growth through the summer.
Rental Inflation Eases to Lowest Since January 2023
Alongside house prices, the ONS also reported that private-sector rents rose 5.9% in July compared with the same month in 2024. This represents a cooling from the 6.7% increase recorded in June, and marks the slowest pace of rental inflation since January 2023.
While rents remain historically high, the deceleration suggests that supply constraints may be easing slightly, or that tenants are reaching affordability limits after several years of sharp rises.
Market Interpretation
The ONS data highlights a divergent but cooling trend across the housing market:
- House prices: Still rising at a moderate pace, supported by lower borrowing costs and a return of buyer confidence.
- Rents: Growth slowing but still elevated, indicating continued pressure on tenants despite signs of stabilisation.
- Transaction patterns: The expiry of temporary tax relief earlier in the year continues to distort comparisons, with activity front-loaded into Q1 and early Q2.
Economists suggest that while the housing market has avoided a sharp downturn, both buyers and renters are still adjusting to a “new normal” of higher borrowing costs compared to the ultra-low interest rate environment of the early 2020s.
Policy Backdrop
The figures arrive against a backdrop of government and central bank interventions aimed at supporting the housing sector:
- The Bank of England cut interest rates to 4% in August, its lowest in over two years, signalling cautious support for the market.
- The government has pledged £9.6 billion in extra funding and guarantees to stimulate housebuilding, alongside a £39 billion affordable housing programme over the next decade.
These measures are intended to improve affordability and supply, though their impact will take time to filter through.
Conclusion
The latest ONS release confirms that UK housing remains in a delicate balance. House prices are climbing again after a brief slowdown, but growth remains well below the March peak. Meanwhile, rents are showing the first meaningful signs of moderation in over two years, though pressures on tenants remain acute.
Taken together, the data suggest the market is entering a stabilisation phase rather than swinging toward boom or bust. For buyers, sellers, and renters alike, the coming months will be shaped by interest-rate policy, government support for housing, and the broader economic climate.
