Prices increased by 0.3% month on month in August – after a 0.4% rise in July and a 0.1% increase in June – pushing the average cost of a UK home to £299,331.

The rise was significantly ahead of the 0.1% expected by economists. However, the annual rate of growth slowed to 2.2%, down from 2.5% in July, according to Halifax. Economists had forecast growth of 2% in August.

“The story of the housing market in 2025 has been one of stability,” said the head of mortgages at Halifax, Amanda Bryden. “Since January, prices have risen by less than £600, underlining how steady the market has been despite wider economic pressures.

“While the wider economic picture remains uncertain, the housing market has shown over recent years that it can take these challenges in its stride.”

However, while the average price of a UK property continues to increase, in the south-west of England prices fell by 0.8% over the past year, the first nation or region to record an annual decline since the east of England in July last year. A 100% council tax premium on second homes in Cornwall was introduced in April, in a move that was expected to bring down property prices.

“With the number of listings, sales agreed, and stock levels higher than this time last year, and with some banks offering specific help to first-time buyers to take their first step on to the housing ladder, this is a sign that the housing market is holding firm,” said the Propertymark chief executive, Nathan Emerson.

However, Emerson said the government’s mooted plans to overhaul stamp duty and potentially make landlords pay national insurance contributions could cause some buyers to delay plans to move.

“The prospect of a stamp duty reform is a powerful incentive which may temper this usual seasonal surge in activity, at least until the dust has settled on the autumn budget,” said the Yopa chief executive, Verona Frankish.

The chancellor, Rachel Reeves, is scheduled to make her budget speech on 26 November.

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That means for the 1.6 million UK homeowners whose cheap fixed rate deals are due to expire by the end of December 2024, higher costs will be inevitable when they come to remortgage.

The more than 1.4 million people on tracker and variable rate deals who have had to absorb immediate increases to their monthly repayments will be hoping for a drop in rates sooner rather than later.

With the help of some of the UK’s leading mortgage experts, here are a few tips on coping with rising costs.

1. Overpay now if possible
If you still have some time on a low fixed-rate deal, your mortgage could work harder for you now.

“Most lenders will allow up to 10% overpayments per annum, but make sure you keep some cash as a rainy day fund as it won’t be easily accessible once used to reduce the mortgage,” says David Hollingworth from mortgage brokers London & Country.

Putting money in a savings account can build up and also earn interest to help to pay down some of the mortgage ahead of fixing a new deal.

2. Switch to interest-only
If you have an interest-only mortgage it means you are only paying the interest on the amount borrowed, and you are not paying down the size of the debt.

Moving to an interest-only mortgage can keep your monthly payments affordable, says Richard Dana, chief executive of digital mortgage broker Tembo.

“However, it’s best to use this as a short-term solution, otherwise you will have to pay your remaining mortgage balance at the end of your mortgage term,” he adds.

Your income and the amount of equity you hold in the property will determine your eligibility.

3. Downsize
This is possibly not a realistic option for a growing family, or for the owners of a small flat.

But for older mortgage customers whose children have flown the nest, selling up and buying a smaller property could reduce the mortgage size – or potentially pay it off entirely.

“Consumers looking to re-mortgage may find it difficult to afford higher interest rates, so seeking independent advice is essential to consider every option available to them, such as downsizing,” says Rachel Springall from financial data firm Moneyfacts.

4. Extend the mortgage term
The typical mortgage term is 25 years, but 30 and even 40-year terms are now available.

“Extending the term can help reduce the monthly payment but can cost tens of thousands of pounds more in interest over the life of the mortgage,” says David Hollingworth.

“Make sure that you regularly review whether you could cut the term back again as your circumstances change.”

5. Make money out of your property
From listing with a short-term letting site like AirBnB, renting out your parking space with an app like Just Park, or taking in a lodger or overseas student, there are several options to make a bit of cash.

“Under the government’s rent-a-room scheme you will get a tax free allowance of £7,500 per year for income generated from your main home too,” says Richard Dana.

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A slowdown in inflation and a buoyant jobs market also helped push property prices up, it added.

The UK’s biggest mortgage lender said a typical home now costs £291,029 on average, a 2.5% jump from January 2023.

The figures come as major housebuilder Barratt announced it would buy rival Redrow in a deal worth £2.5bn.

Housebuilders have struggled over the past couple of years as higher interest rates dented demand and construction costs rose.

But expectations of rates being cut this year, with inflation – the pace of price rises – slowing down, has led to “increased confidence” in the housing market, Halifax said.

However, it warned that while house prices had risen, interest rates still remained high compared with the historic lows seen in recent years, making it more expensive for prospective buyers to borrow.

The lender said first-time buyers faced average deposits of £53,414.

“It’s not surprising that almost two thirds of new buyers getting a foot on the ladder are now buying in joint names,” said Kim Kinnaird, director of Halifax Mortgages.

Ms Kinnaird said “affordability challenges are likely to remain” in the coming months and said further falls in house prices “should not be ruled out, against a backdrop of broader uncertainty in the economic environment”.

Halifax’s house price data is based on its own mortgage lending, which does not include buyers who purchase homes with cash, or buy-to-let deals. Cash buyers account for about a third of housing sales.

First-time buyers and homeowners looking to remortgage properties have faced higher borrowing costs in recent times. The Bank of England has held interest rates at a 16-year high of 5.25% since August 2023, in a bid to try to slow down the rapid pace of general price rises.

Alice Haine, personal finance analyst at Bestinvest, said with inflation expected to slow down in the coming months, the Bank could cut interest rate as soon as the summer.

“The improving outlook has resulted in better mortgage rates and affordability levels for first-time buyers and those looking to refinance,” she said.

A typical two-year fixed mortgage rate would charge 5.57% interest on Tuesday, while a five year deal would charge 5.22%, according to data from Moneyfacts.

This is down from a peak of 6.86% for a two-year deal in July last year, it said.

David Thomas, chief executive of Barratt said despite the “challenging” economic environment, demand for the company’s homes was “strong”.

His comments came after Britain’s biggest homebuilder Barratt announced it would buy Redrow, which is headquartered in Flintshire, Wales, in an all stock deal.

The new combination, to be renamed “Barratt Redrow”, will aim to build more than 22,000 homes each year in the medium term.

“Since the start of January, we have seen early signs of improvement in both reservation rates and buyer sentiment, helped by expectations of lower interest rates and the introduction of more competitive mortgage rates,” Mr Thomas added.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said the decision behind the merger was due to both companies believing they would be “stronger together”, adding that they would have “much bigger clout” to take advantage on the need for more housing in the UK.

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Lenders change the rates of their mortgage products regularly. That’s why we update the average mortgage rates weekly and compare how they’ve changed since the previous week. You can also compare the rates across a range of loan to value (LTV) percentages.

What’s happening with mortgage and interest rates now?
There has been lots of news about Base Rate rises and how they can impact mortgage rates. The Bank of England (BoE) meet about every six weeks to decide whether the Base Rate should go up or down, or stay the same. The Base Rate is currently 5.25%, and has been held at this level since August.

The current average mortgage rate for a five-year fixed rate mortgage is 4.72%, up from 4.69% last week. The current average rate for a two-year fixed rate mortgage is 5.08%, up from 5.03% last week. The lowest available five-year fixed rate is 3.99%, and the lowest available two-year fixed rate is 4.38%.

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What are the current UK mortgage interest rates?
On Wednesday 21 February 2024

Average fixed-term mortgage rates for home-buyers with 5-10% deposits
Loan to value (LTV) Term Average rate 14 Feb 2024 Average rate 21 Feb 2024 Weekly Change
95% 2-year fixed 5.73% 5.79% +0.6%
95% 5-year fixed 5.33% 5.35% +0.02%
90% 2-year fixed 5.26% 5.31% +0.05%
90% 5-year fixed 4.81% 4.86% +0.05%

Average fixed-term mortgage rates for home-buyers with 15-25% deposits
Loan to value (LTV) Term Average rate 14 Feb 2024 Average rate 21 Feb 2024 Weekly Change
85% 2-year fixed 5.03% 5.08% +0.05%
85% 5-year fixed 4.64% 4.67% +0.03%
75% 2-year fixed 4.85% 4.90% +0.05%
75% 5-year fixed 4.59% 4.61% +0.02%

Average fixed-term mortgage rates for home-buyers with 40% deposits
Loan to value (LTV) Term Average rate 14 Feb 2024 Average rate 21 Feb 2024 Weekly Change
60% 2-year fixed 4.46% 4.50% +0.04%
60% 5-year fixed 4.13% 4.19% +0.06%

These rates are provided by Podium and are an average based on 95% of the mortgage market. All rates are based on products with a circa £999 fee.

When could mortgage rates start to drop?
Right now, the financial markets are predicting that the Base Rate is at its peak. It’s thought interest rates will remain flat into 2024, before starting to come down. And we can expect fixed-rate mortgage products to start to take on some of these reductions.

But it’s difficult to predict when we could start to see more sizeable drops in mortgage rates, mostly because their movement is dependent on several factors. Including what happens with inflation, falling swap rates, and no unexpected shocks to the economy.

Average monthly mortgage repayments by average house price
You might be wondering what this week’s average mortgage rates could mean for average monthly mortgage repayments, and how this compares to the average rates offered last week.

The current average asking price of a typical first-time buyer property* is £224,815. Based on that, the average monthly mortgage payment for a first-time buyer taking out an average five-year fixed, 85% LTV mortgage, is now £1,081 per month if repaying over 25 years, down from £1,074 a year ago.

Source: Rightmove House Price Index and Podium data
*First-time buyer homes includes all 2-bed properties and smaller that come to market (houses and flats).

How much can you borrow with a mortgage?
The amount you can borrow with a mortgage is determined by an affordability assessment and your interest rate is determined by the amount of deposit you have, otherwise known as loan-to-value (LTV).

LTV is expressed as a percentage, and it reflects the size of the mortgage you need as a proportion of the value of the home you want to buy. The bigger the deposit you have, the lower the LTV, and vice-versa.

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