Planning to make your move in 2025? Understanding what’s ahead in the housing market can help you make better decisions. Here we outline the top predictions for the year to help you navigate the market with confidence.
1. 2025: A Continued Buyer’s Market
The housing market in 2025 is poised to remain favourable for buyers, building on trends seen in 2024. Buyers can expect an improved selection of homes and longer average selling times, giving them an advantage when negotiating sales.
What about house prices? Forecasts suggest that average asking prices could rise by 4% by the end of 2025, with an estimated 1.15 million transactions—a notable increase compared to recent years. While these signs point to improving market conditions, sellers will still need to price their properties competitively to attract buyers.
2. Mortgage Rates Likely to Decline—but Don’t Expect Historic Lows
Good news for prospective buyers: five-year and two-year fixed mortgage rates could dip to around 4.0% in 2025, down from current averages of 4.83% (five-year fixed) and 5.08% (two-year fixed).
This anticipated drop is linked to predictions of four Bank of England Base Rate cuts in 2025. However, external influences such as inflation and global events could still impact the trajectory of rates.
For those weighing their mortgage options, two-year fixed deals may become increasingly appealing as their rates converge with five-year deals. This trend reflects a growing demand for flexibility, particularly in uncertain economic times. While these changes should enhance affordability and boost buyer confidence, ultra-low mortgage rates are unlikely to return.
3. Stamp Duty Adjustments and Buyer Activity
From April 1, 2025, stamp duty rates are set to rise, potentially increasing costs for some home-movers. Despite this, first-time buyers are showing strong activity, with inquiries to agents up 13% compared to last year.
The impact of the new stamp duty thresholds will vary by region. For instance, while only 8% of homes in London will qualify for first-time buyer exemptions, over 70% of properties in the North East fall within the £300,000 stamp duty-free bracket.
4. Remortgaging to Take Centre Stage
If your fixed-rate mortgage deal ends in 2025, remortgaging will likely be a key consideration. Many homeowners who locked in five-year fixed rates during the pandemic, or two-year fixes after the mini-budget, will face decisions about their next mortgage.
Here’s what to expect if your mortgage deal expires in 2025:
If you secured a five-year fixed deal in 2020, when rates were much lower, you may face higher costs when remortgaging.
If you locked in a two-year fixed deal in 2022 or 2023 at higher rates, you could benefit from lower monthly repayments as rates decline.
5. London’s Housing Market Poised for a Comeback
London’s price growth has trailed behind the rest of the UK in recent years, with average asking prices in the capital rising by 12% over the past five years compared to 21% nationally.
However, the capital is primed for a resurgence in 2025. Factors such as the return of a five-day office work week for some employers and renewed interest from international buyers are expected to drive up demand, breathing new life into London’s housing market.
In conclusion
During 2025 its expected that the housing market will stay favourable for buyers, with more choice and negotiating power despite a 4% rise in asking prices. Mortgage rates may drop to around 4.0%, boosting affordability, though not to historic lows. Stamp duty changes in April could raise costs for some but offer exemptions for first-time buyers in some regions. Many homeowners will focus on remortgaging as fixed-rate deals expire, while London’s market is set to rebound, driven by international buyers and shifting work trends.
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