As we begin 2025, many of those with a mortgage, or those looking to get one, will be looking at what the housing market and mortgage industry will bring.
According to a study conducted by Online Mortgage Advisor, in partnership with 21 mortgage experts from leading businesses such as Find The Right Mortgage, several trends are expected to shape the landscape of property and financing in the coming year.
The insights provide a broad view of key indicators, from mortgage rates to housing prices, renovation mortgages to self build mortgages and much more, offering crucial information for potential homeowners.
18 out of 21 experts anticipate a decline in mortgage rates during 2025, with the first adjustments potentially arriving in January if the Bank of England lowers its base rate.
11 experts predict that rates for a 2-year fixed deal will fall within the 3-4% range by the end of the year, though others believe it may remain closer to 4-5%.
2. House prices to rise
19 experts agree that house prices will increase in 2025. This aligns with historical trends showing consistent annual growth, even amid fluctuating market conditions.
3. A New Help to Buy Scheme could be launched
17 experts believe the government will introduce a replacement for the Help to Buy scheme in 2025, providing assistance to first-time buyers navigating a competitive market.
4. Inflation and economic volatility
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16 experts predict inflation will increase slightly before stabilising around the Bank of England’s 2% target. The potential impact of global economic factors, such as tariffs imposed by the new U.S. administration, could create additional volatility.
What this means for homeowners and buyers
With mortgage rates likely trending downward and house prices poised to rise, 2025 could be an opportune year for property investment or homeownership.
For prospective buyers, exploring flexible financing options, including innovative government schemes and bespoke lender offerings, could help navigate the market.
Aaron Forster, Director at Find The Right Mortgage, highlighted the potential for a busy year: “2025 will be a significant year for remortgages, with the largest volume of fixed-rate maturities expected. While inflation may rise slightly, the anticipated fall in interest rates will help stimulate the market, leading to modest increases in property prices.”
Aaron Forster
Aaron is an experienced mortgage broker and financial advisor with over 18 years in the industry. Currently the Director of "Find the Right Mortgage," he specialises in whole-of-market mortgage and protection advice. Previously, he held leadership roles at Create Finance, TSB Bank, and Lloyds Banking Group.
How will you be affected by mortgage rate declines?
For those with variable rate tracker mortgages linked to the Bank of England base rate, a potential base rate decrease will likely result in an immediate lowering in mortgage payments.
People with standard variable rate mortgages may also see their rates decrease with any interest rate decline, but the exact change depends on the lender, so it's not guaranteed. To be sure, check your mortgage terms in the original offer document.
Those with fixed-rate mortgages won't see immediate changes in their payments, but they will be affected when their fixed term ends.
The impact on your mortgage payments depends on your mortgage type and when your current deal expires.
Declining rates will have a knock-on effect for mortgage rates(Image credit: Getty Images)
How will renovators be affected?
Interest rate rises could affect those renovating a house in a couple of different ways. Those who’ve taken out a loan to fund their project could find that a decline in interest rates means the project will cost less to complete.
Renovation mortgages often have higher interest rates than regular ones because lenders take on more risk when lending money for home improvements. However, they can still be a helpful choice if you want to enhance your home but can't afford to pay for it all at once.
As for renovation mortgages, it is likely that those on tracker or variable mortgages will be affected if interest rates decline. But as with conventional mortgages, those on fixed-rate deals will be unaffected.
What about self builders?
Self build mortgage interest rates generally exceed standard rates for purchasing or refinancing a home, typically ranging from 5% to 7% annually.
The associated arrangement fees are subject to variation, contingent upon the chosen broker or lender.
Additionally, the duration of your commitment to the lender typically ranges from one to three years, depending on the specific lender and product selected.
Inflation is also impacting building materials with rising prices and construction materials shortages impacting those looking to build their own home.
Self build mortgages offer stage payments, based on the cost of each stage of work(Image credit: getty images)
Could interest rates fall again?
The Bank of England will hold its next interest rate meeting on 6 February 2025 where they will decide whether the base rate goes up, down or stay the same.
Tim Parkes, CEO of RAW Capital Partners, said: “With services inflation still a persistent issue and consumer spending expected to rise over the festive season, the CPI could tick up in the coming months, potentially resulting in a slower pace of base rate cuts than previously predicted.
“That said, the bigger picture is encouraging. Any rate reduction is positive news for the lending and property markets. Although rates may never return to the historic lows seen between 2008 and 2021, they are trending in a favourable direction, making it easier for homeowners and investors to manage both current and future loans.”
Paresh Raja, CEO of Market Financial Solutions, said: "It’s important to recognise that interest and mortgage rates remain significantly higher than pre-December 2021 levels.
"As a result, securing suitable financing options will still be a significant challenge for some borrowers – this is where the specialist lending sector will continue to play a vital role. To help build momentum in the property market, lenders must now step up and focus on providing a diverse range of bespoke and flexible financial products that can meet the specific needs of brokers and their clients."
Tim Parkes
Tim has over 30 years of experience in fund management, banking, and financial services, including senior positions at a FTSE-listed bank and over 10 years managing offshore funds.
Paresh Raja
Paresh Raja founded Market Financial Solutions in 2006. The company specialises in providing bridging loans and buy-to-let mortgages, catering specifically to property investors who need fast, flexible financing solutions for their real estate projects.
News Editor Joseph has previously written for Today’s Media and Chambers & Partners, focusing on news for conveyancers and industry professionals. Joseph has just started his own self build project, building his own home on his family’s farm with planning permission for a timber frame, three-bedroom house in a one-acre field. The foundation work has already begun and he hopes to have the home built in the next year. Prior to this he renovated his family's home as well as doing several DIY projects, including installing a shower, building sheds, and livestock fences and shelters for the farm’s animals. Outside of homebuilding, Joseph loves rugby and has written for Rugby World, the world’s largest rugby magazine.
