What’s in store for mortgages in 2025?

2024 provided some rollercoaster moments for mortgages.

Rates went up and down as the economy with inflation falling from 4.0% in January to 1.7% in September and then back up to 2.3% in October. The general election saw the first budget from a Labour government in 14 years.

The Bank of England cut base rate for the first time since 2020, and mortgage rates below 4% made a reappearance. 

But what about 2025?

Will mortgage rates go down in 2025?

Although initially after the budget mortgage rates began to rise as lenders worried about the outlook for the economy, they have begun to cut rates, with some big names announcing reductions of up to 0.35%.

Several factors are at work. Off the back of the biggest tax increases in three decades announced in the Budget, the Office for Budget Responsibility predicted inflation will rise to 2.6% in 2025. Increased inflation means slower falls in Bank of England base rate.

Those coming to the end of a fixed rate mortgage deal will see a big jump in their mortgage payments. The fall in rates from their highest levels has made things a little easier, and at Continuum we can usually help by arranging a remortgage deal that is affordable.

Large rate cuts might be unlikely, but gradual reductions are probable, although more slowly than previously anticipated.

The good news is right now borrowers with a good credit score and decent downpayment might get a mortgage rate of between 4%-5% with some help from a Continuum mortgage expert.

If inflation gradually falls back to the Bank of England's 2% target then mortgage rates could also drop further.

House prices in 2025

The first part of the year is expected to see a flurry in housing activity as home buyers try to complete before Stamp Duty increases in April. 

After the April 5th deadline, Stamp Duty on an average-priced home in England will double approximately from £2,100 to £4,600. Buyers who don’t beat the increases may want the costs dealt with by vendors in the form of lower purchase prices.

Will this work as a negotiating tactic? It remains to be seen. Demand remains high, with a backlog of first-time buyers and home movers waiting to see what impact the 2024 general election and the Budget had on mortgage costs. This pent-up demand could cause house prices to rise in 2025.

There are signs buyer demand is increasing, with the number of sales agreed up from this time last year. However, house price growth stayed muted over 2024, with recent figures showing average house prices falling by 1.4% as home sellers priced their properties more competitively in the hope of attracting buyers. 

There are other factors which could damp down price growth. Buy to Let landlords and second-home buyers may be selling up, as tax changes including provision for councils to double the council tax for second homes. Increased supply could tend to make buyers more selective, and more ready to walk away from higher priced property.

What should you do in 2025?

Mortgage rates currently look likely to come down in 2025, but there are no guarantees.  Increased inflation, depressing employment data or events abroad could all mean rates staying higher than expected.

This – coupled with Stamp Duty increases - could lead to a cooling of the market as people hold off from buying. 

On the other hand, there could be a rush in the market if rates then do come down. This could cause house prices increases, making it more expensive to buy later on even with a lower interest rate. 

Understanding your affordability earlier and seeking expert advice helps you make an informed choice about when to buy.

At Continuum we can help, with a free, no-obligation, personalised mortgage recommendation that compares your eligibility to thousands of mortgages across the entire market, to help see all the options available to you. 

To find the most appropriate mortgage deal for you in 2025, simply call us now.

Consumer price inflation, UK - Office for National Statistics

Interest rates: Bank of England cuts rate for first time more than four years | The Independent

Mortgage rates back below 4% again – but will they get any cheaper?

Will mortgage rates fall in 2025? | MoneyWeek

Two lenders ring in 2025 with mortgage rate cuts - will other banks follow? | This is Money

Inflation set to stay above 2% for next four years, says OBR

How much stamp duty will I pay in 2025? | MoneyWeek

House Price Index: January 2025 - Zoopla

Asking prices for UK homes show big November dip but 2025 set for gains, Rightmove says | Reuters

The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to a mortgage strategy, you should seek independent financial advice before embarking on any course of action.

The Financial Conduct Authority does not regulate taxation advice.

Levels, bases and reliefs from taxation are subject to individual circumstances and may be subject to change.

Your home or property may be repossessed if you do not keep up repayments on your mortgage.You may have to pay an early repayment charge to your existing lender if you remortgage.