Mortgage Market Outlook
As we progress into 2025, the UK mortgage market is exhibiting signs of recovery and stabilization, influenced by recent economic developments and policy decisions.
The UK housing market has commenced 2025 with solid momentum. Recent data indicates a 12% year-on-year increase in new sales agreed, as buyers expedite purchases ahead of anticipated stamp duty changes in April. Additionally, the number of homes for sale has risen by 10% compared to early 2024, providing buyers with more options. House prices have experienced modest growth, with annual house price inflation now at 2%, up from -0.9% the previous year. The average property price stands at £267,700, reflecting a £5,200 increase over 2024 – mpamag.com
UK Finance forecasts continued steady growth in both house purchase and remortgage lending as affordability improves further. In 2025, residential house purchase lending is expected to grow by 10% to £148 billion. Remortgaging activity, which was relatively subdued in 2024, is anticipated to grow by 30% to £76 billion, driven by more fixed-rate deals coming to an end and gradual improvements in affordability – ukfinance.org.uk
Inflation Trends
As of December 2024, the UK’s inflation rate stood at 2.5%, slightly above the Bank of England’s target of 2%. Projections suggest that inflation may rise to 2.8% by the third quarter of 2025 before easing – commonslibrary.parliament.uk
Persistent inflationary pressures, particularly in the services sector, have been a focal point for policymakers. Factors such as wage growth and increased social security contributions have contributed to these pressures – reuters.com
Bank of England Base Rate Review
The Bank of England’s Monetary Policy Committee (MPC) is scheduled to meet on February 6, 2025, to review the base rate. Currently, the base rate is at 4.75%, following two cuts in 2024. Financial markets anticipate a high likelihood of a further 0.25% cut in the upcoming meeting, with potential additional reductions later in the year. However, the pace and extent of future rate cuts remain uncertain, as the Bank balances the need to control inflation with supporting economic growth – morningstar.co.uk
Implications for Borrowers
For prospective homebuyers and those considering remortgaging, the current environment presents both opportunities and challenges. While the anticipated rate cuts may lead to more favorable mortgage rates, persistent inflation and potential economic uncertainties necessitate careful financial planning. It’s advisable for borrowers to stay informed about market developments and consult with mortgage advisors to navigate this evolving landscape effectively.
UK Mortgage Market and Economic Developments in Early 2025
- Slow UK growth ticks up in January but price pressures surge, PMI shows
- Stumbling growth and stubborn inflation: the BoE’s rate cut challenge
- UK homebuilders’ demand recovery in focus as affordability concerns return
First Time Buyer Fixed Rates
| Lender | Rate | LTV | Rate Type |
| Skipton | 5.52% | 95% | 2-year fixed |
| Virgin | 5.12% | 90% | 2-year fixed |
| NatWest | 5.19% | 95% | 5-year fixed |
| NatWest | 4.70% | 90% | 5-year fixed |
Remortgage Fixed Rates
| Lender | Rate | LTV | Rate Type |
| Principality | 4.35% | 75% | 2-year fixed |
| Principality | 4.29% | 60% | 2-year fixed |
| Principality | 4.28% | 75% | 5-year fixed |
| Principality | 4.25% | 60% | 5-year fixed |
| HSBC | 5.04% | 75% | 10-year fixed |
Buy to Let Purchase Rates
| Lender | Rate | LTV | Rate Type |
| Kensington SPV | 4.89% | 75% | 5-year fixed |
| HSBC | 4.24% | 75% | 5-year fixed |
PRODUCTS CORRECT AS OF 30.01.25
ALL MORTGAGE RATES ARE SUBJECT TO CREDIT STATUS, INCOME AND AFFORDABILITY.
ARRANGEMENT FEES AND EARLY REPAYMENT CHARGES MAY APPLY TO THESE PRODUCTS THESR ARE FOR ILLUSTRATIVE PURPOSES OF RATES. PLEASE CONTACT AN ADVISER FOR A RECOMMENDATION TO MEET YOUR CIRCUMSTANCES. ALL VIEWS IN MARKET COMMENTARY ARE THE PERSONAL OPINIONS OF THE AUTHOR.
YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
