2025 Mortgage Market
2025 Mortgage Market
As we enter a new year, we take stock of developments in the mortgage and real estate sector.
While the future is uncertain, we expect a more balanced and stable market for 2025.
These assessments are a personal analysis based on current conditions; the final decisions depend entirely on your specific situation and needs.
Do not hesitate to contact us for more information and solutions tailored to your individual situation.
Factors Underpinning Our 2025 Forecasts
The recent fluctuations in the mortgage market form the basis of our forecasts for this year. In the past years, the uncertainty created in the market by factors outside the sector caused us to make our forecasts more cautiously. For example, the Bank of England’s base rate hike in early 2022 as part of the fight against inflation showed how effective unpredictable factors can be.
While we can measure inflation growth, the factors that trigger it, such as the conflict in Ukraine or the remnants of the pandemic, are difficult to predict. Nevertheless, we can make reasonable predictions about this year’s market dynamics based on the available data, especially in light of last year’s more balanced course.
House Prices Should Increase Steadily
Recent data shows a steady rise in house prices. This looks more like a gentle surge rather than a giant tidal wave effect; nevertheless, prices are rising overall. In November 2024, the average UK house price reached £298,083, up 1.3% from October and a 4.8% annual growth rate. This contradicted the expectations of many who had expected a much weaker market.
There will be a change in stamp duty in April, but there is no big buying rush at the moment. There is always an element of uncertainty in the mortgage market because the decision to move is often triggered by personal circumstances rather than small differences of a few pounds. A new baby or a change of job triggers the need to buy much more than mortgage rates or house prices.
Unless affordability is an issue, people move when they are ready to move. So we expect to see steady, perhaps strong growth next year. Zoopla, for example, forecasts a 2.5% increase in real estate prices, assuming mortgage rates will be around 4.25%.
What About Mortgage Rates?
There seems to be some good news in this area, but still no major change is expected. The recent base rate change has led many major lenders to change their mortgage rates. This has also triggered increased competition, which has led to attractive opportunities for homebuyers. Whether there will be many rate cuts in 2025 remains to be seen. Most experts predict a slow decline at best.
As we keep reminding people, these rates are not extraordinarily high; they were actually very low before, so we need to be realistic about how much they will change. Andrew Bailey, Governor of the Bank of England, while optimistic, emphasized that any cuts would be implemented with caution so as not to trigger inflationary pressures.
In sum, will interest rates fall? Maybe, but there may be little or no fall in the short term and it is almost impossible to see a fall as fast as they have risen in the last few years.
What About First-Time Home Buyers and Those with Fixed Rate Mortgage Contracts?
The outlook for first-time buyers looks very positive. The government seems determined to help first-time buyers; it plans to rebrand the existing mortgage guarantee scheme as “freedom to buy” and make it permanent. They have also announced that first-time buyers will be given priority access to new housing projects. It is not yet clear how this will be implemented.
As for the millions of people exiting fixed-rate mortgages in 2025, we have to accept that they will stay, no matter what the rates are. If you bought a home when rates were low, you are likely to see an increase. But the positive news is that mortgage lenders offer many reasonable options. If your mortgage contract is up for renewal, you can contact us when you are ready to start looking.
Mortgage Market Overview and Key Expectations for 2025
Taking all the data into account, the most important development we can expect in 2025 is the gradual growth of the real estate and mortgage markets in England and Wales. Even assuming interest rates remain stable rather than declining, given the upward trend in house prices, this should result in a very strong market as we move towards 2025. The stabilization after all the uncertainty and volatility is a welcome development for all stakeholders, and it is hoped that this stability will continue for a long time.
In addition, we will closely monitor economic indicators, mortgage rates and other important factors affecting loan availability, so that we can provide you with ongoing support when you need it. Ultimately, the most decisive factor in your new mortgage decision will always be your own personal situation and the factors that trigger your purchasing needs.
