2024 UK Mortgage Market Review and 2025 Predictions

2024 has been another rollercoaster ride for the UK mortgage market. Here’s a review and some predictions for 2025. We saw a change in government and interest rate cuts from the Bank of England, with expectations that fixed-rate offerings would improve. However, the recent budget also brought uncertainty around potential policy changes impacting housing and mortgages resulting in volatility in swap rates and mortgage products.

Looking ahead to 2025, there are a few key things to watch out for:

Fixed or Tracker?

With interest rates expected to remain unpredictable, the debate between fixed and tracker mortgages will intensify. Fixed rates offer you certainty but could prove expensive if the base rate falls. Trackers are riskier but could save money if rates decrease. Borrowers will need to carefully gauge their financial situation and their appetite for risk.

Affordability Challenges

Affordability remains a significant concern, especially in areas like London and the South East. Wage growth and house price inflation will be key factors determining how accessible homeownership is for many. There is some good news, some lenders have been making positive changes to their affordability models with a select few now offering up to six times income.

Stamp Duty

The big shake-up coming in 2025 is the stamp duty changes. We are expecting a flurry of activity in the first quarter as:

– people rush to buy homes before the new rules kick in

– first-time buyers try to complete purchases before the stamp duty goes up

– second homeowners consider their options carefully whilst evaluating if the extra cost is affordable

These stamp duty reforms will be a mixed bag for different groups:

First-time buyers may benefit from lower stamp duty initially. But there could also be more competition in the market driving up prices temporarily.

For second homeowners, the changes could mean higher stamp duty costs. So, we’re advising clients looking at second properties to get moving as soon as possible. Overall, we are expecting 2025 to be another eventful year for mortgages and property in the UK. While there are opportunities, buyers need to be prepared to act fast, stay informed, seek professional advice, and carefully consider their options. With the right preparation and guidance, navigating the 2025 mortgage landscape can become more manageable. If you want to chat through your options then please get in touch.

Wishing all of our past, existing, and future clients a very happy Christmas and a joyful 2025.