The UK housing market has seen a surge in activity at the start of 2025, with the number of newly listed homes up by 11% compared to last year, according to Rightmove. This increase comes despite ongoing uncertainties surrounding interest rates and stamp duty.

A record number of sellers entered the market after Boxing Day, with the average asking price rising by 1.7% (£5,992) in January to £366,189. This marks the largest price increase at the start of a year since 2020. While prices typically rebound after a December dip, this year’s rise has been particularly notable.

Falling interest rates, spurred by a sharper-than-expected drop in inflation to 2.5% in November, have encouraged more buyers to bid on homes. However, the average property value remains nearly £9,000 below the record high set in May 2024, reflecting affordability challenges for some buyers.

The number of buyers contacting agents since Boxing Day is up 9% year-on-year, with agreed sales increasing by 11% over the same period. The average number of properties listed per estate agency branch is at its highest January level in a decade, intensifying competition among sellers. Rightmove cautioned that overly ambitious pricing could leave some properties unsold.

Rightmove forecasts 1.15 million property transactions this year, alongside a 4% rise in average asking prices. However, challenges remain, including uncertainties around the Bank of England’s pace of interest rate cuts and upcoming stamp duty changes on April 1, which may impact first-time buyers and those purchasing higher-priced properties.

For first-time buyers, the stamp duty threshold will fall to £300,000, leaving those in less expensive areas largely unaffected. However, higher charges for properties above this threshold could deter purchases in pricier regions unless further support for first-time buyers is introduced.

Mortgage rates have remained relatively elevated. Rightmove’s weekly tracker reports the average five-year fixed mortgage rate at 4.75%, largely unchanged from last year, while two-year fixed rates have marginally improved to 4.97% from 5.08%.

Following a surprising drop in UK inflation and sluggish economic growth, financial markets have adjusted their expectations, anticipating two or three quarter-point rate cuts this year. Bond market fluctuations, including a brief sell-off earlier this month, have further complicated the outlook.