The UK mortgage and housing market is diverse and will be subject to more movement as we progress into the year 2025. For homeowners, it is crucial to understand the trends and the possible shifts in market direction and to be prepared for changing economic conditions. Whether you wish to get on to the property ladder, refinance your home, purchase another home or you simply want to know what is going on in the market, this post will provide you with an overview of the UK housing and mortgage market and the best way to deal with the changes.
Property Prices and Trends
The last few years have seen UK property prices increase steadily, but the rate of increase has slowed. The Office for National Statistics (ONS) reveals that the average house price in the UK stood at an average of £290,000 as of late 2024, up by 5% from the previous year, but slower than the consecutive year on year growth of over 10% seen in previous years.
Factors that have caused the rate of increase to drop include; affordability, interest rate rises and a decline in demand in some markets. However, the competition is still high, especially in London and the Southeast due to the limited supply of houses. But those supply issues are increasingly seen across the rest of the UK as well.
Emerging Regional Differences
There has been a change in demand for property. Demand is growing in regional cities, coastal towns and rural areas. The changes in the working environment that were brought on by the pandemic have led many people to move out of the big cities in search of more space and cheaper homes. Hotspots include Manchester, Bristol and parts of Wales, as they offer a good balance between economic activity and lifestyle. The East Midlands has seen significant growth, too, as the growing logistics industry makes use of the excellent location for transport connectivity.
Understanding the UK Mortgage Market
The mortgage market is closely associated with the housing market, and it is very important for homeowners to stay abreast of both, as it affects affordability and choices when looking to re-mortgage or move home.
Interest Rates and Their Impact
The Bank of England base rate has remained steady during 2024, albeit starting to fall as economic activity picks up and a change of Government has steadied the markets. At 4.75% it still remains relatively high due to inflationary pressures, having a knock on impact on mortgage rates. While 4.75% base rate is higher than the rates that were seen in the early 2020s, it is still relatively low when compared to historic levels.
Two-year and five-year fixed rate deals have remained the most popular mortgage products because homeowners are still concerned about rising interest rates. However, due to the issue of affordability some people are now questioning whether they should re-mortgage or extend their deal with their current mortgage provider. This is where working in partnership with a mortgage broker has its benefits.
Lending Criteria and Mortgage Products
Lenders are continually reviewing lending practices to ensure that lending is affordable. However, innovations in the market are seeing new products become available, such as green mortgages, where borrowers are rewarded if they buy energy efficient houses. There are also a number of longer-term fixed rate mortgages which may have terms of up to 40 years as buyers are banking on higher incomes later in life to clear the mortgage balance.
If you are a homeowner and are thinking of re-mortgaging or buying a new property, it is crucial to compare different mortgage products on the market and get some professional advice. Again, this is where a mortgage broker like Grange Mortgages has access to the wider marketplace.
Forecast for 2025 and Beyond
Based on the forecasts available, the expectation is that the housing market will remain in a steady state, with consistent circa 3-5% house price growth due to continued demand for homes.
Gradual Price Cooling
It is highly unlikely that there will be huge increase in property prices in 2025 but most of the analysts are expecting the prices to continue to rise. Affordable regions and markets with strong infrastructure investment are expected to perform best.
Green Housing and Sustainability
It is also anticipated that sustainability measures will be incorporated more within the housing market. More and more people are looking for energy efficient homes and government schemes that support such properties may boost people’s interest in such properties.
Mortgage Market Evolution
It remains to be seen how the mortgage market will develop in the future, but it is safe to assume that it will have to transform in order to cope with the economic conditions and consumers’ needs. Some of the new products that may be offered in the market include flexible mortgage products which may be suitable for first-time buyers or self-employed workers.
Some top tips to help you get ahead in 2025:
1. Pay Attention to Interest Rates
It is unlikely that we will have rates as low as those of the early 2020s, but stay mindful of rate changes, especially if you are looking to move home or re-mortgage your home. If you are not sure which direction interest rates will move in, you can secure a mortgage deal up to 6 months in advance of your existing deal ending.
2. Explore Green Initiatives
If you are planning to renovate a house or buy a new home, research green mortgages and government schemes that help people to renovate their houses and make them more energy efficient.
3. Think About the Future
Whether you are thinking of re-mortgaging, moving to a bigger property or downsizing, it is important to plan ahead. To avoid being caught unawares by any market fluctuations it is advisable to engage a financial advisor or a mortgage broker as early as possible.
4. Evaluate Regional Opportunities
If you happen to be a homeowner in search of a new home, then perhaps it is good time to check out the properties that are available in regional areas. There can be much bigger bang for buck in rural areas.
Stay Ahead in the UK Housing Market
The UK mortgage and housing market is still under stress due to ever-increasing demand for homes. It’s important for homeowners to be well equipped with the right information and strategies to help them manoeuvre through these dynamic markets.
If you want to learn more about how we can help you, don’t hesitate to contact Grange Mortgages to appraise your personal circumstances. We can help you to navigate the mortgage market and secure the best possible deal.