With the end of 2024 approaching, attention is turning to the outlook for house prices and mortgage rates in 2025. Experts are weighing in on expected market trends, interest rate movements, and potential opportunities for both homebuyers and sellers in the year ahead.
Overview of the 2024 Property Market
The housing market in 2024 underwent significant developments, shaping the foundation for anticipated trends in the coming year. These changes have influenced buyer behavior, price trajectories, and mortgage conditions, setting the stage for what lies ahead in 2025.
- The Bank of England’s base rate decreased to 4.75%, the first cut since March 2020.
- House prices grew by 4.8%, reaching an average of £298,083, according to Halifax.
- Property sales rose significantly in the latter half of the year, fueled by a balanced supply-demand dynamic and reduced interest rates.
These changes have set the stage for evolving trends in 2025, with varying predictions from industry professionals.
A Positive Start for 2025
Jake Rowson, sales director at Ryder & Dutton, highlighted the market’s resilience in 2024. According to Rowson, his agency observed a 20% increase in sales compared to 2023. He predicts continued growth in the coming year:
- A mini-surge in sales activity during the first quarter as buyers race to complete transactions before the Stamp Duty Holiday ends in April.
- A projected 5% growth in house prices over the year, driven by steady demand and declining mortgage rates.
- Improved affordability due to competitive mortgage deals, fostering greater buyer confidence.
Anticipated Mortgage Trends
Aaron Forster, Director at Find The Right Mortgage, foresees a busy year for mortgages in 2025, especially for customers whose fixed-rate deals will mature. He notes that:
- Interest rates are expected to gradually decline, though more slowly than previously predicted.
- Falling rates may stimulate the market, supporting a slight rise in property prices despite potential inflationary pressures.
Challenges in Mortgage Affordability
Despite these optimistic projections, challenges persist. Amanda Bryden, Head of Halifax Mortgages, pointed out concerns about affordability:
- Many homeowners with expiring fixed-rate deals face refinancing at higher rates than their initial agreements.
- Mortgage affordability remains a significant hurdle for buyers, though employment conditions are expected to support continued demand.
Halifax predicts modest house price growth of up to 3% in 2025 and a slight increase in market transactions.
Opportunities for First-Time Buyers
First-time buyers may find new openings in 2025. John Fraser-Tucker of Mojo Mortgages noted that the number of first-time buyers increased by 20% in 2024, driven by adaptations such as opting for longer mortgage terms averaging nearly 30 years.
Key factors for first-time buyers in 2025 include :
- Reduced competition from landlords due to recent budget measures.
- Potential Stamp Duty Land Tax (SDLT) changes in April, which may spur activity early in the year.
Long-Term Market Momentum
Tim Bannister, a property expert at Rightmove, predicts that the housing market will maintain its strong momentum into 2025, with steady demand and improving affordability expected to drive continued activity.
- Mortgage rates are expected to decline, improving affordability and driving demand.
- House prices could rise by 4%, supported by increased market activity.
- The pace of rate reductions will significantly influence market trends during traditionally active periods.
Bannister also cautioned that while the overall market outlook is positive, unexpected developments could still impact the trajectory of prices and sales.
Experts agree that 2025 holds promise for the UK property market, marked by stable growth in house prices and falling mortgage rates. However, challenges around affordability and the pace of interest rate changes remain critical factors to watch. First-time buyers and sellers alike may find opportunities to capitalise on a more balanced and dynamic market.
