Tune into any news channel and you’ll be confronted with headlines about the rising cost of living. As well as day-to-day and utilities expenses, it seems that house prices are constantly on the rise, too. Historically, house prices doubled around every seven years. These days, although house prices generally rise over time, the process is much more gradual and depends on a range of factors. In this article, we examine the current state of house prices and the factors that influence them. Read on to discover everything you need to know.
What’s Happening with House Prices?
Recently published figures from the Land Registry showed an annual rise in house prices of 2.8% in the 12 months to July 2025. The average house price in the UK is £269,735. Figures for the same period showed that growth slowed in more expensive areas of the UK, such as London and the South East, where growth rates were 0.7% and 1.2%, respectively.
On the other hand, areas of the North of England experienced the largest house price increase. The North East experienced a 7.9% rise, and the North West a 4.8% rise.*
What Influences House Prices?
With some areas of the country experiencing a decent rise in house prices over the past year and others not so much, it’s helpful to examine what actually impacts the cost of houses. These are some of the most important factors to consider:
Interest Rates
Interest rates determine how much it costs people to borrow money. When interest rates are high, borrowing is more expensive, which can reduce the demand for houses and cause prices to stall or drop. When interest rates are low, mortgages can be more affordable, which encourages people to buy homes, potentially leading to higher prices as demand increases.
Inflation
Inflation has an impact on house prices. As inflation is the rate at which the cost of goods and services rise, when it is high, people might have less money to spend on buying a house, which can mean demand is lower. This can cause house prices to stall or drop.
Mortgage Availability
Sometimes, lenders might tighten up their lending criteria during times of economic uncertainty. This can mean fewer people are able to borrow. It then has a knock-on effect on deposit requirements and weakens buying power. This causes house prices to stagnate or drop. In contrast, when lenders are more relaxed with their criteria, more people can access the funds to buy property, increasing the demand and the process.
Consumer Confidence
Consumer confidence is all about how positive people feel about the overall economy and their personal finances. Naturally, when confidence is low, they are less inclined to make a big purchase like a house, and when it is high, they will be more likely to go for it. This can then affect house prices.
Supply and Demand
Like anything, supply and demand can have an impact on house prices. In areas where demand is high but supply is low, house prices can be higher as bidding wars can drive up prices. When the property market is saturated with properties for sale, buyers have more power, which can lead to sellers accepting lower offers just to sell their homes.
Location
As demonstrated earlier in this article, house prices can vary drastically by location. Factors such as proximity to local amenities, quality schools, transportation links, and economic hubs can all impact house prices. Similarly, investment in local areas can also bump house prices up. There has been significant investment in the North over recent years, which may be a contributing factor to the rise in house prices there.
Other Factors That Can Influence Property Prices
While the above are some of the most critical factors when it comes to determining house prices, the following can also have an impact on how much properties are bought and sold for:
- The energy efficiency of a home
- The age and style of the property
- Whether improvements like extensions or renovations have been made
- The employment rate
- Government decisions on housing policies and planning
- Stamp duty and taxes
- Significant world events like the pandemic, Brexit, or financial crashes
We’re Here to Help with Your Home-Buying Journey
House prices are complex. While they generally increase over time, there are a lot of elements that go into determining house prices. Whether it’s a seller’s market or a buyer’s market has a significant influence, as does the general health of the economy and lending conditions. If you’re thinking of taking the leap into home ownership and need mortgage advice you can trust, contact our friendly and professional team today.
*https://www.which.co.uk/news/article/whats-happening-to-house-prices-aVCwI8I22pBe
