Mortgages, Interest Rates and House Prices in 2025

Welcome to 2025! Here we are once more, at the start of a brand new, shiny year that promises much.

Although the end of last year petered out a touch, we have already seen a busy start to the year with a few lenders cutting rates in an effort to get out of the blocks quickly.

Whilst we still have products starting with a 4 for now, it may not be too long before we slip into the 3’s territory, although there is a lot of early data to digest before that happens. At present five-year fixes are hovering just above the 4% level, with 2-year fixes a lot closer behind than they have been for many a month.

The key is, as always, the SWAP rate market and SWAPs have been stubbornly stuck at current levels since before the holiday period. In fact, they have recently edged up a touch in response to equally stubborn inflation not just in the UK, but globally.

The outlook is complex at best in the short term, and for the Bank of England to act and cut further in February several things need to align. They do have a tricky balancing act around how they deal with the inflation question as well as an economy that looks like it will get worse before it gets better. The good news, however, is that if we take the year as a whole the outlook is that rates will fall, the million-dollar question as ever, is when.

The mortgage and property market in the first quarter however looks like it will continue to show how robust it is, not least because of the impending Stamp Duty deadline which will see more people, especially First-Time Buyers, looking to act before the changes at the end of March.

Lenders also are keen to lend and sound very bullish about the rest of this year, with an expectation that Gross Mortgage Lending overall will rise by around 15% in 2025.

Looking In The Crystal Ball

As ever, at this time of year, it is very tempting to dust off the crystal ball and predict what is going to happen. It is of course a fool’s errand in times like these, but nonetheless, it’s worth taking an educated guess. I will of course preface this with the old Latin Economics term, “Ceteris paribus”, (all other things being equal). In other words, ignoring any potential surprises we have had over the past few years, global events and of course whatever Mr Trump may do.

Bank Base

At present Bank of England Base Rate stands at 4.75% and whilst many believe there could be more, I think by the end of the year this will be at 4%. In other words, three potential cuts of 0.25% this year.

The last vote to keep rates the same was closer than many thought it would be so we could see an early cut in February as the first move.

House Prices

Our predictions last year for growth of around 3% looks as if it was about right, (Halifax House Price Index reported a 3.3% growth last year), and despite the usual protestations from naysayers, I think overall we will see growth similar in 2025 as things begin to improve and more buyers come back to the market.

Whilst the Government is making all the right noises around increasing supply any meaningful change will not happen until towards the end of this Parliament, so with demand increasing and supply remaining somewhat constrained, this will help to keep prices stable. There will of course be monthly ups and downs and regional variations.

Mortgages in 2025

I agree with the consensus that Gross mortgage lending will increase by around 15% this year. There will be more purchase activity and there are an awful lot of people coming to the end of their initial mortgage rates in 2025 who will be keen to remortgage.

Those who were unfortunate to have remortgaged around the time of the Liz Truss debacle will be relieved to be able to move onto a lower rate, although there are still many coming to the end of lower 5-year fixes who will have to deal with some payment shock.

The prediction is that the number of people recognising how important advice is will continue to grow, with the Intermediary Mortgage Lenders Association, (IMLA) predicting that more than 90% of mortgage lending will be done through mortgage brokers by 2026.

Summary

Whilst 2025 may not have quite as dynamic a start as we all thought a few months ago, overall, this is likely to be a transformative year, building on some of the improvements of last year. I remain cautiously optimistic and think we will see increased levels of housing and mortgage transactions, and those looking to buy this year will look back and realise they bought at a good time.

The future is always bright and wish you all a happy, healthy and prosperous 2025.

Best Mortgage Rates

In terms of mortgage rates, for standard residential mortgages, borrowers can obtain 2-year fixes at 4.11% (6.80% APRC) and 5-year fixes from 4.01%, (6.00% APRC), whilst variable discounted rates are around from 4.69%, (7.50% APRC) and variable tracker rates from 4.83% (7.90%).

Those looking at Buy-To-Let can now obtain products from 3.39% (8.00% APRC) for a 2-Year fixed, 5.02%, (7.60% APRC) for a 2-year tracker or 5-year fixes are available from 3.94% (4.40% APRC).

Contact

To speak to one of our friendly, down-to-earth advisers please call us on 020 7220 5110 or click here. We look forward to chatting with you.

Important

Your home may be repossessed if you do not keep up repayments on your mortgage. There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.