Well, here we go again, a new year and a new attempt to predict what may happen over the next 12 months in the mortgage and property world. As always, there is no way of being certain what will happen, but this year, the leaning seems to be towards a more stable landscape.
Well, for the moment at least.
As always these are just our opinions based on the current situation. What really matters is you and your needs, so please contact us to discuss your individual circumstances.
What Can We Base 2025 Predictions On?
Ah, now, here we have the reason for that little mention of ‘for the moment’ in the opening paragraph. The mortgage market, as we have seen over the last few years, can be unpredictable at times. Not only that, but it responds to a series of factors that are outside the industry itself. A good example was when inflation pushed the Bank of England base in early 2022. While you can predict the effect of an increase in inflation, you can’t predict the factors such as war in the Ukraine or the residual effects of the pandemic, that drove it. However, there are some things we can look at, particularly known factors such as the results of a slightly more stable year last year.
So then, based on what we know and can reasonably rely on as guides, let’s plunge into what is likely to happen this year.
House Prices Should Rise Steadily.
Recent data indicates a steady rise in house prices. It has been more of a swell than a tidal wave increase, but still, prices are generally on the up. In November 2024, the average UK house price reached £298,083, marking a 1.3% increase from October and a 4.8% annual growth rate. To some extent that did buck the expectations of many people who expected a much weaker market.
We have a change to stamp duty coming in April, but at the moment, there is no mad rush to buy. There is always a wild card in play in the mortgage market because the decision to move is more often triggered by personal circumstances than a few pounds here and there on the deals. A new baby or a job move tend to drive the need to buy a lot more than mortgage rates or house prices. As long as there is no problem with affordability, people move when they are ready to move. So, I think we will see a steady, maybe even a strong growth next year. Zoopla, for example recently predicted a 2.5% increase in property prices assuming mortgage rates are around the 4.25% mark.
Speaking of mortgage rates…
What About Mortgage Rates?
Well, this seems to be an area where there is some good news, but again, it’s unlikely to be a seismic shift. The recent base rate change has already led to many major lenders changing their mortgage rates. It also triggered some increased competitiveness resulting in some good deals for the home buyer. Whether there will be many cuts in 2025 remains to be seen. Most pundits are predicting a slow fall at best. As we keep reminding people, these rates are not unusually high, they were previously actually very low, so we need to be realistic about how far they will change. The Governor of the Bank of England, Andrew Bailey, while optimistic, has also stressed that any reductions would be implemented carefully to avoid triggering inflationary pressures.
So, in summary, will interest rates go down? Maybe, but probably not much if anything in the short term and almost certainly not as fast as they rose in the last couple of years or so.
What About First Time Buyers and Those on Fixed Rate Terms Mortgages?
Well, things are looking rather positive for first time buyers. The government seems committed to helping first time buyers into homes and plan to rebrand the current mortgage guarantee scheme as ‘freedom to buy’ and make it permanent. They have also made some statements about giving priority access to new builds for first-time buyers. How this will roll out remains to be seen though.
As for the millions coming out of fixed rate mortgage deals in 2025, I guess we need to accept that the rates will be whatever the rates will be. It is likely that you will be looking at an increase if you bought when the interest was low. However, the positive news is that the mortgage lenders are offering plenty of reasonable options. If your mortgage deal is coming due, talk to us as soon as you are ready to start looking. We can help.
Bringing it all together, what is the one big thing we can expect in 2025
I guess the headline takeaway from all this would be that it seems like the property and mortgage markets in England and Wales are on a path of gradual growth. Even assuming interest rates continue to only stabilise rather than fall, and looking at the way house prices are going, we are heading into a very strong market as we move into 2025. That is good news for everyone. After all the turmoil and uncertainty, it’s good to see some stability. Long may it continue.
That said, we will be keeping a very close eye on the economic indicators and the other factors that make a big difference to mortgage rates and availability so that we can help when you need us. Ultimately, as always, the biggest factor in your new mortgage will be your own circumstances and what is driving you to buy.