Housing market forecast for 2025: 5 things to know
Are you considering moving in 2025? If so, then you probably wonder what the next 12 months will bring for the housing market. Make sure you're prepared for your moving journey by reviewing the experts' key predictions.
1. The market for buyers will remain strong in 2025
It's clear that 2024 will be a buyers' market, and next year will be no different. There will continue to be an advantage for home buyers when it comes to negotiating a sale due to factors such as an improved choice of homes for sale and a longer average time to sell.
How could house prices change? Despite the biggest growth we've seen since 2021, experts predict average asking prices will increase by 4% by the end of next year. There were a lot more people seeking to move than homes for sale during the pandemic years of 2020 to 2022.
In 2025, we expect around 1.15 million completions, a significant increase over recent years. While this activity reflects improving market conditions, sellers must still price their properties competitively to attract buyers.
2. Mortgage rates will fall, but not to historic lows
It is estimated that five-year and two-year fixed rates could drop to around 4.0% in 2025, down from the current averages of 4.83% (5-year fixed) and 5.08% (2-year fixed).
The Bank of England has predicted four base rate cuts in 2025, which contributed to this reduction in mortgage rates. Inflation and geopolitical events, however, could still affect rates in the future.
The cost of two-year fixed-rate deals is more closely aligned with five-year rates, making them more appealing to consumers. In this trend, shorter terms may offer greater flexibility, reflecting changing preferences.
There won't be a return to ultra-low mortgage rates, even as lower rates boost buyer confidence.
*Rates from 10th December 2024. These rates are provided by Podium and are an average based on 95% of the mortgage market. All rates are based on products with a circa £999 fee.
3. Changes in stamp duty impacting buyer activity
Some home-movers may have to pay more when buying a new home starting April 1. We found that some buyers were in a rush to complete their purchases before the deadline. Compared to last year, the number of first-time buyers who have contacted agents is 13% higher this year.
Depending on the region, first-time buyers may be able to purchase a stamp duty-free home. Compared to London, where only 8% of homes qualify, over 70% of properties in the North East do.
Property expert, Tim Bannister, says: “Stamp duty charges rising from 1st April means we are likely to see a particularly busy first three months of the year as first-time buyers, home-movers and investors all try to complete on planned purchases and avoid higher charges. The effects of stamp duty rising will be felt for the rest of the year too, and we may see some negotiation tactics play out, particularly on properties close to the £300,000 mark, as both buyers and sellers try to mitigate their higher costs through the price agreed.”
4. Mortgage lenders will be focusing on remortgaging
You may consider remortgaging in 2025 if your fixed-rate mortgage is nearing its end. During the pandemic or after the mini budget, many homeowners secured five-year mortgages that will expire at the end of their current deals.
The following could happen if your mortgage deal ends in 2025:
If you locked in a five-year fixed rate during 2020, when fixed rates were much lower on average, you may see higher costs when you remortgage
If you secured a two-year fixed deal at higher rates in 2022 or 2023, you could benefit from lower monthly repayments as rates decline
Mortgage expert, Matt Smith from Rightmove, says: “It’s likely to be a mixed year for the market. Those who took out peak-mortgage rate two-year fixes after the mini-Budget will see their deal come to an end and will likely find themselves with lower costs next year. By contrast, many movers will be rolling off a low five-year fixed rate agreed during the busy market of 2020 and will see costs rise. With remortgaging and product transfers set to be an important theme for lenders next year, we’ve launched a remortgage rate tracker to show the latest trends in this sector and monitor lender behaviour next year.”
5. London will see a resurgence
London has lagged behind the rest of the UK when it comes to price growth. Nationally, home prices have risen by 21% over the past five years, compared to 12% in the capital.
However, factors like the return of a five-day office-based working week for some companies as well as renewed interest from international buyers are expected to drive demand in the capital. In 2025, London price growth will be in line with, or possibly ahead of, national price growth.
Using our Instant Valuation tool, you can get a free estimate of your home's value, as well as updates on price changes.
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Areas we cover:
Warwickshire, Worcestershire, West Midlands, Staffordshire, Leicestershire, Rutland, Nottinghamshire, Derby, Gloucestershire, Herefordshire, Cotswolds and Northamptonshire.
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