11 house price and mortgage predictions for 2025

It's been a relatively quiet year for the property market. Mortgage rates have fallen more slowly than anticipated, denting affordability and scuppering the prospect of significant house price rises.

2025 is likely to be different. The new government has ambitious housebuilding plans and is seeking to overhaul standards in the rented sector, while the end of stamp duty relief could see buyers and sellers race against the clock to get springtime sales over the line. 

Read on to find out our predictions for house prices, mortgages and the rented sector in 2025. 

What will happen to house prices?

1. House prices will rise, but don't expect a boom

Most indices show house prices increased by between 1% and 4% in 2024. 

Despite the slow market, values have held up much better than expected. At the start of the year, Rightmove and Halifax both predicted prices would fall slightly.

Forecasts are more bullish for 2025, with experts anticipating rises of around 3-4%.

This seems realistic, though the end of stamp duty relief from 1 April could put the brakes on the prospect of bigger price rises.

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What will happen to mortgages?

2. Rates will continue to fall

However, rates still remain much higher than a few years ago. The average rate on a two-year fix fell from 5.93% to 5.62% over the course of 2024, and borrowers should expect more substantial drops in the new year. 

The base rate, currently 4.75%, is projected to fall to around 4% by the end of 2025. This could result in the cheapest two-year fixes falling from the current rate of 4.2% to around 3.5%.

3. First-time buyers will struggle with affordability

Even with the expected downward pressure on rates, it's likely that market-leading 90% deals won't fall much below 4.5% by the end of 2025.

This is likely to result in an even greater proportion of first-time buyers taking out longer mortgage terms of 35-40 years in an attempt to meet the affordability criteria set by lenders. 

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4. ...but the government may have something up its sleeve

The government is consulting on introducing a longer-term version of the mortgage guarantee scheme, which encourages lenders to offer more 95% mortgages.

However, this is unlikely to have a significant impact. Right now, plenty of 95% mortgages are available, but rates are locking would-be buyers out of homeownership. 

Nothing has been mooted yet, but don't be surprised if the government brings in a new form of mortgage assistance for first-time buyers before the end of 2025.

This could take the form of a scheme similar to Help to Buy, reducing the amount buyers need to borrow when taking out a mortgage, or could involve the government subsidising some of the cost of 95% mortgages for first-time buyers. 

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5. Savvy fixers won't be able to avoid higher rates

Many of these will be homeowners who smartly took out a fix of five years or longer when mortgage rates were very low. 

While these borrowers have now avoided the very highest rates, the Bank of England says they can expect average hikes of around £150 a month when they remortgage. 

What will happen for homebuyers and sellers?

6. There'll be a race to beat the stamp duty hikes

Buyers in England and Northern Ireland have benefited from lower stamp duty rates since September 2022, but thresholds will return to their previous levels from 1 April.

This will add an average of £2,500 on to the cost of moving home, though first-time buyers in some areas will face significantly bigger hikes of £5,000 or more. 

There's likely to be a rush to beat the deadline of midnight on 31 March. If it looks like deals won't go through in time, buyers may return to the negotiating table, lowering their offers to reflect the additional tax bill.

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7. It'll still be a buyer's market

There's likely to be a big spike in the number of deals going through in the first quarter of next year, but this will quickly die down once the stamp duty deadline has passed.  

Once the dust settles, it's likely to remain a buyer's market for the rest of the year, as with 2024. 

On the positive side, mortgage rates are likely to fall, and UK Finance predicts a 10% rise in lending for house purchases next year. However, the slow speed of rate reductions throughout the year will mean affordability challenges will persist.

This means that the market will remain very price-sensitive, and sellers who want to shift their properties quickly will need to be realistic about the price they ask for.

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8. Housebuilding will be a hot topic

Much has been made about how realistic (or otherwise) the government's housebuilding targets are, and this will be a big talking point in the new year.

With progress likely to be slow, all eyes will be on how the government seeks to stimulate the speed of building, and whether it brings in any initiatives to encourage people to buy the swathes of new homes it has promised to build. 

The previous government introduced several new-build home schemes (Help to Buy, Starter Homes and First Homes) with very different success rates, and it'll be interesting to see whether the new government follows suit in offering incentives to developers to get houses built, and to buyers to get them sold. 

9. Leasehold changes will step up a gear

The government has pledged to implement measures from the Leasehold and Freehold Reform Act 'at pace in the new year'. This will theoretically enable leaseholders to buy their freehold or extend their lease sooner and at a lower cost. It has also promised 'further reforms' on unaffordable ground rents and estate fees. 

There have been many false dawns in recent years for leaseholders, but there are hopes that these changes, alongside plans to bring in a new 'commonhold' system of ownership, will finally consign some of the issues to the past. 

What will happen for landlords and tenants?

10. Renters' Rights Bill will come into force

The government's Renters' Rights Bill is expected to come into law in 2025.

It includes plans to ban 'no fault' evictions and offer greater protections for tenants, including a ban on unfair rent hikes and bidding wars, a new rented sector database and stopping landlords from banning tenants with children or those in receipt of benefits. 

11. The landlord sell-off will continue, keeping rents high

This pattern is likely to continue, with landlords facing more red tape from the upcoming Renters' Rights Bill and proposed changes to energy-efficiency rules. 

UK Finance predicts a 7% drop in mortgage lending to landlords in 2025, while the National Residential Landlords Association says 31% of landlords are planning to sell properties in the next two years. 



source https://www.which.co.uk/news/article/11-house-price-and-mortgage-predictions-for-2025-aWAm63L8xlwM
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