The past few years have not been a great time to be a homeowner. For those who needed to remortgage, rates soared, while at the same time property prices began to stagnate, leaving homeowners in a sticky situation, paying more for a home where the value was staying the same. 

In previous decades, even when you consider the 2008 financial crisis, purchasing a home was a key way many people saved for their futures, and for the most part it worked well.

According to a report from Rathbones, between 1980 and 2016, the value of the average property rose 6.7% per year. That far outpaced inflation, which made owning a home a comfortable investment and helped people take care of their future. (Even if you should not be treating the home you live in as an investment in the traditional sense.) But since 2016, this rate has slowed to 3.7%, meaning the price of a home has barely kept pace with inflation.

HOW IT HAPPENED

Why have price increases slowed recently? It’s not as simple as a single factor but part of it is due to the low interest-rate environment seen post-2016 and into the pandemic and what followed it.

In order to stimulate business growth, the Bank of England set interest rates at extremely low levels which translated into low mortgage rates.

Because people were able to get cheap mortgages during this period, they could afford to buy more expensive houses. At the same time, new regulations like buy-to-let mortgages came into effect making the purchase of additional properties possible. The net effect was house prices spiked because there was suddenly a flurry of people who were willing and able to buy.

Inflation soared during the pandemic as demand for everything outstripped supply. The government tried to quash rising prices by raising interest rates, but they stayed higher than expected for longer than expected which made mortgage rates cripplingly high.

Without the help of low mortgage rates, house prices quickly became beyond the reach of many prospective buyers.

At that point, the market was faced with a conundrum – house prices had risen to a level where fewer people could afford them, and without multiple buyers competing for the same property price rises slowed sharply, resulting in today’s sluggish environment.

WHERE DO WE GO FROM HERE? 

Slowly, demand for mortgages has begun to tick up again. The Bank of England reported 64,167 mortgages were approved in June 2025, 1,500 more than analysts had been forecasting.

There has been a loosening of some of the regulation around mortgages, which allows lenders more flexibility in who they allow to borrow. This could create an easier route for those looking to hop onto the housing ladder

Despite this increase in mortgage demand, however, the average asking price has actually decreased slightly according to research from housing portal Rightmove (RMV).

According to the firm’s July property market survey, the average cost of a home coming to market has decreased by 1.2% in the past month, to £373,709.

For those looking to use their home as an investment, the future may seem a little less rosy.

Many of the initiatives being put in place at this point are aimed at making housing more affordable, and efforts to increase the volume of new builds will mean there is more supply coming onto the market.

So, while home values may come back to a range where people can start purchasing again, this may not mean prices jump again, even though demand has been restored.

A UNIQUE INVESTMENT

In recent years, with house prices rising at nearly the same level as inflation, home ownership hasn’t been that fruitful as an investment.

In contrast, a portfolio comprised of 25% UK equities and 75% global equities has outpaced inflation by an average of 3.4 percentage points each year according to research by Rathbones.

Property investments do come with some unique benefits, however. First, you are able to invest a large amount of money up front, and although you may be paying interest on this money (unless you are a cash buyer), if the property market does well you have a significant stake in it. By contrast, money in a portfolio is usually added bit by bit over many years.

Owning a home can also can remove the expense of rent from your budget. While this will be replaced by a mortgage, at least that works towards ownership and there is potential for your ‘equity’ to grow as an investment.

For now, though, it seems any investment growth might be quite slow. While there’s no way to be sure how markets will move in the future, for the time being the trend of rising house prices has clearly eased.

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