As we step into 2025, the UK mortgage market is showing signs of gradual recovery and increased activity. Here are some key trends and insights for the first half of the year that prospective homebuyers and those looking to remortgage should keep an eye on:

Interest Rates and Affordability

The Bank of England has held interest rates steady at 4.75%[1], but there is optimism that rates may start to decrease later in the year. This potential reduction could make mortgages more affordable, easing the financial burden on borrowers[2]. Current mortgage rates for two-year fixed deals are around 4.64%, while five-year fixed rates are approximately 4.35%[3].

Market Activity and Lending

The mortgage market is expected to see increased activity in 2025. UK Finance forecasts a significant rise in gross lending, with an 11% increase compared to 2024[4]. This growth is driven by improved affordability and a competitive lending environment. Lending for house purchases is projected to grow by 10%, while remortgaging activity is set to surge by 30%[4].

Property Prices and Buyer Trends

Property prices are anticipated to rise modestly, with an average increase of 4% across the UK[5]. London, in particular, is expected to see a rebound in price growth, driven by the return of workers to offices and increased interest from international buyers[5]. First-time buyers remain active in the market, spurred by upcoming stamp duty changes and improving affordability[5].

Regulatory Environment

The regulatory landscape remains stable, with no major changes expected in the immediate future. However, borrowers should stay informed about any potential shifts in government housing policies that could impact mortgage rates and lending criteria[6].

Expert Predictions

Industry experts are optimistic about the mortgage market’s trajectory in 2025. A majority believe that mortgage rates will fall, providing further relief to borrowers[6]. The Bank of England’s efforts to control inflation and stabilize the economy are key factors influencing these predictions[7].

Conclusion

The first half of 2025 looks promising for those considering taking out a new mortgage. With potential rate cuts on the horizon, increased market activity, and stable property prices, now could be an opportune time to explore your mortgage options. Stay informed and consult with mortgage advisors to navigate the evolving market landscape effectively.

Feel free to reach out if you have any questions or need further assistance with your mortgage plans!

References

[1] Interest rates held at 4.75%: Will they go down in 2025?

[2] What will happen to interest rates, inflation and mortgages in 2025 – according to experts

[3] MORTGAGE RATES FORECAST 2024, 2025, 2026 IN UK – POUND STERLING LIVE

[4] Increased activity in the mortgage market anticipated in 2025

[5] What to expect in the UK property market in 2025 | Mortgage Introducer

[6] 2025 Mortgage Predictions: What To Expect In The New Year

[7] Mortgage Rate Predictions 2025 | What Homebuyers Need to Know? – UK …

Blog Posted 2nd January 2025