The housing market in 2024 has been anything but steady, leaving many of us wondering what 2025 will bring. From fluctuating mortgage rates to shifting house prices, the roller coaster isn’t over yet. Let’s recap the past year and hear from the experts about what lies ahead for mortgage rates and property values.

The Mortgage Rate Journey in 2024

For first-time buyers and homeowners looking to remortgage, 2024 has been challenging. Mortgage rates haven’t settled into a predictable pattern, causing uncertainty for many.

At the start of the year, the average two-year fixed rate stood at 5.93%, with five-year fixes slightly lower at 5.55%. Rates dipped slightly in March, reaching 5.76% and 5.34% respectively, as fluctuating swap rates – the underpinning of fixed-rate mortgages – influenced lender decisions.

However, rates climbed again over the summer, peaking at 5.95% for two-year fixes and 5.53% for five-year fixes. The markets were watching the Bank of England (BoE) closely, waiting to see if interest rates would be cut after inflation hit the BoE’s 2% target.

In a surprising move, the BoE reduced interest rates in August for the first time in four years, bringing the base rate down to 4.75%. This marked a turning point, with financial experts predicting further rate reductions in 2025.

The Organisation for Economic Co-operation and Development (OECD) anticipates that interest rates will fall to around 3.5% by early 2026, offering potential relief to borrowers.

What Will Mortgage Rates Look Like in 2025?

While predictions are optimistic, mortgage rates in 2025 will depend on several factors, including inflation stability and economic conditions. Nicholas Mendes, a mortgage technical manager at John Charcol, explained:

“The role of swap rates is crucial. When these rise, mortgage rates often follow, even if the base rate drops. The extent of reductions will hinge on inflation consistently staying below the BoE’s 2% target.”

For those looking to remortgage, starting the process early is essential. Experts recommend beginning your search three to six months before your current deal ends to avoid being moved to a lender’s standard variable rate (SVR), which can be costly.

First-Time Buyers Face Hurdles

Affordability remains a significant challenge for first-time buyers. With record-high rents and rising living costs, saving for a deposit is more difficult than ever.

Adding to the pressure, stamp duty rates are set to revert to previous levels in April 2025. For first-time buyers, the “nil rate” band will reduce from £425,000 to £300,000, potentially adding £6,250 in stamp duty costs for a typical first home in London.

Despite these obstacles, getting onto the property ladder can still be a wise financial move, allowing buyers to build equity over time rather than continuing to rent.

What About House Prices in 2025?

House price forecasts for 2025 are mixed. Nationwide expects a surge in demand in early 2025 as buyers rush to complete transactions before the stamp duty hike. However, this demand could cool after April.

Zoopla predicts a 2.5% average increase in property values, with the Midlands, northern England, Scotland, and Wales likely to outperform the UK average. Southern England may see slower growth due to affordability pressures.

Rightmove forecasts a 4% rise in asking prices but notes that competition among sellers is at its highest in a decade, making the market highly price-sensitive.

Advice for Homeowners and Buyers

Whether you’re a first-time buyer or a homeowner nearing the end of your mortgage deal, careful planning is key.

• For First-Time Buyers: Start saving early, factor in stamp duty changes, and consider consulting a mortgage broker for tailored advice.
• For Homeowners: Avoid falling onto your lender’s SVR by shopping for a new deal well in advance. A broker can help you explore options, including switching lenders or securing a product transfer with your current provider.

Looking Ahead

The housing market in 2025 will likely remain dynamic, influenced by economic shifts and policy changes. While the outlook for mortgage rates is positive, affordability challenges and regional disparities in house price growth will continue to shape the market.

By staying informed and seeking expert advice, buyers and homeowners can make informed decisions. Boydens work closely with Pargin Financial to get the best mortgage deals for our clients. Unlike most banks, Pargin Financial will secure a rate for you as part of their service but then seek to review this a couple of weeks before progressing to ensure that the market has not changed in your favour. In doing so they are able to secure the best rate at the time.

If you have any queries regarding a new or existing mortgage, please do not hesitate to contact us we will be only too happy to try and help you.