As 2024 comes to an end, many are looking ahead to what 2025 could bring for the housing and mortgage market. To help provide some clarity, industry experts gathered their thoughts on what we might expect in the coming year.
This year has been full of significant changes, including the first drop in the Bank of England base rate since 2020, and mortgage rates dipping below 4% in some cases. So, what lies ahead? Here’s a closer look at predictions for interest rates, house prices, inflation, and more.
What Will Happen to Interest Rates in 2025?
The Bank of England base rate saw a reduction in 2024, dropping from 5.25% to 4.75%. For 2025, opinions on where it could end up vary.
Some experts predict the rate will settle between 3% and 4% by the end of the year, while others believe it will remain slightly higher, in the 4% to 5% range. Much depends on broader factors like the global economy, recent tax changes, and even potential impacts from international politics.
While long-term forecasts suggest the base rate might slowly fall over the next few years, unexpected global events could still shift the market, making this an area to watch closely in 2025.
Will Mortgage Rates Drop Next Year?
Most of the experts believe that mortgage rates are likely to decrease in 2025, and some think this could happen as early as January, depending on the Bank of England’s next moves. However, a few think rates might stay where they are.
Lenders have recently increased rates following changes announced in the Autumn Budget, but if base rates fall further, it’s possible that mortgage rates will follow. For those remortgaging or buying their first home, this could bring some relief – though the market remains unpredictable.
2-Year Fixed Mortgage Deals?
When it comes to 2-year fixed-rate deals, predictions are mixed. Some experts think these rates will fall into the 3% to 4% range by the end of 2025, while others expect them to stay between 4% and 5%.
Ultimately, where these rates land will depend on how the economy performs and whether the Bank of England continues to adjust its base rate. It’s important to keep an eye on market changes to secure the best possible deal.
Will House Prices Keep Rising?
Most experts agree that house prices are likely to increase in 2025. Historically, property values have risen year-on-year, and there’s little to suggest this trend will change.
This is good news for homeowners but could add further challenges for first-time buyers trying to get on the property ladder.
What About Inflation?
Inflation is another key factor influencing the market. Many experts believe it might rise slightly in the early part of 2025 before settling back closer to the Bank of England’s 2% target.
However, external factors, such as international trade policies, could create more volatility. If inflation climbs too quickly, it might prompt the Bank of England to raise rates again.
Will There Be a New First-Time Buyer Scheme?
Since the Help to Buy scheme ended in 2023, many prospective buyers have been hoping for a similar initiative to make homeownership more accessible. Unfortunately, most experts believe a new scheme is unlikely in 2025.
That being said, there are still existing options for first-time buyers, such as Deposit Unlock, the First Homes scheme, and the Mortgage Guarantee Scheme, which can help people take their first steps onto the property ladder.
The housing and mortgage market is always evolving, and while 2025 holds plenty of uncertainty, these expert insights offer a glimpse into what we might expect. If you’re planning to buy, sell, or remortgage, staying informed will be key to making the most of whatever opportunities arise.
