As we step into 2025, the mortgage market is brimming with questions. How will interest rates evolve? Will property prices stabilise? And what can homeowners and landlords expect? Let’s explore the key trends and actionable insights for the year ahead.
2024 in Review: Rates and Market Trends
For residential mortgages and standard buy-to-let properties in personal names, fixed rates in 2024 typically ranged between 4.00% and 4.99%. Sub-4% deals (3.99% or less) did occasionally surface but were short-lived and often disappeared quickly as demand spiked.
The 2-year fixed rates were generally more expensive than 5-year fixed rates, reflecting lenders’ preference for longer-term stability in pricing. This trend also applied to buy-to-let mortgages, where rates were slightly higher than those for residential lending, as is often the case.
Property prices showed regional variations, with areas in the Midlands and the North experiencing moderate growth, while London and the South East saw a slight dip. Nationwide, average house prices fell by 1.5%, influenced by tighter affordability criteria and higher interest rates. Halifax house price index shows the average house price in the UK at £297,166 which is an annual increase of 3.3%.However, reduced competition from investors gave first-time buyers more opportunities.
2025 Expectations: What’s Next for Interest Rates and the Market?
The latter part of 2025 could see some improvements in fixed rates, with Sub-4% deals (3.99% or less) becoming more prevalent. While early 3% deals may remain ambitious, late 3% rates such as 3.8% or 3.9% are expected to be more common.
- Like in 2024, 5-year fixed rates are likely to remain cheaper than 2-year fixed rates, offering more stability for borrowers willing to commit long-term.
- The lower the loan-to-value (LTV) ratio, the better the rates borrowers can expect. Residential mortgages are likely to have more competitive pricing than buy-to-let products.
- Coming off a 2-year fixed rate? Rates in 2025 are likely to be lower than those secured in 2023, albeit marginally.
- Coming off a 5-year fixed rate? Brace for a sharp increase in rates compared to the historically low deals secured in 2020. However, take pride in having enjoyed years of low payments-those who opted for 2-year fixed rates in 2020 have faced significantly higher rates for the past few years.
House prices are expected to stabilise in 2025, with a projected growth of 1%-2% nationally. Factors like improved affordability due to marginally lower interest rates and government schemes aimed at first-time buyers are likely to underpin demand. However, higher borrowing costs and economic uncertainty may continue to cap rapid price growth.
The rental market will remain strong, with rents predicted to grow by another 6%-8% in 2025, driven by high demand and limited new housing stock. For landlords, this continued rent increase, coupled with a 30%-35% rise in rents over the past five years, should help absorb the impact of rising interest rates. However, landlords will need to remain vigilant about compliance and evolving tax regulations.
Actionable Advice for 2025
For Homeowners: Prepare for Remortgaging
- Start acting as soon as your remortgage window opens. Lenders often allow applications up to six months in advance, providing an opportunity to secure a rate before potential increases.
- If you’re coming off a historically low 5-year fixed rate, prepare for higher monthly payments. Budget adjustments and proactive discussions with a mortgage adviser can ease the transition.
- Despite higher rates compared to pre-2022, this could still be a good time to get on the property ladder. Property prices are stabilising, and competition remains manageable.
- A longer-term perspective and a well-structured mortgage plan can help navigate the current environment.
- Landlords with a long-term view should consider investing now. Rising rents and potential property price growth over the next decade can offset short-term challenges.
- Leverage options such as Limited Company Mortgages and professional advice to structure deals efficiently, particularly for portfolio landlords.
1. Interest rates are likely to stabilise, but monthly payments will remain higher than in the low-rate era.
2. First-time buyers and long-term landlords have opportunities to act decisively in a stabilising property market.
3. Proactive planning and personalised advice will be essential to navigating the complexities of 2025.
At Nachu Finance, we specialise in providing personalised, transparent advice tailored to your unique needs. Whether you’re navigating a remortgage, buying your first home, or expanding your property portfolio, our expertise ensures you make informed decisions. Let us guide you through 2025 with confidence-get in touch today.
