2025 Housing Market Forecast: 5 Key Trends You Should Know

Planning to buy or sell a home in 2025? You might be wondering what the housing market will look like. For buyers, what you can afford will depend on interest rates and local market trends. Sellers might need to adjust their prices based on demand and inventory levels.

Here is what you need to know to stay ready and make informed decisions.

1. 2025 Will Be a Buyers' Market

The housing market in 2025 will continue to favour buyers, much like in 2024. With more homes to choose from and properties taking longer to sell, buyers will have the upper hand in negotiations.

As for prices, experts expect a 4% rise in average asking prices by the year's end. Though this marks the strongest growth since 2021, it is in line with long-term trends. After the pandemic-driven surge in prices due to high demand and limited supply, the market is normalising. Around 1.15 million property transactions are forecasted for 2025. Sellers, however, will still need competitive pricing to attract buyers.

2. Mortgage Rates Are Set to Fall but Won't Hit Rock Bottom

Good news for buyers: mortgage rates are expected to drop in 2025. Five-year fixed-rate mortgages could settle around 4.0%, down from the current 4.83%, with two-year fixed rates likely to follow. 

The drop is tied to expected cuts in the Bank of England's base rate, though factors like inflation or global events could affect the exact rates. Shorter two-year deals may become more popular, providing flexibility at similar costs to five-year plans. However, do not count on the ultra-low rates seen during the pandemic.

3. Stamp Duty Changes Will Shake Up the Market

Starting April 1, 2025, stamp duty rates will rise, raising buying costs for many homebuyers. This change has already caused a 13% jump in first-time buyer inquiries compared with last year. 

The availability of homes that qualify for stamp duty exemptions varies. For example, only 8% of properties in London fall under the new £300,000 exemption while more than 70% of homes in the Northeast qualify. 

Property experts predict a busy start to the year as buyers try to close deals before the rate surge, saying we may see more negotiations around the £300,000 price point as buyers and sellers look to offset higher costs.

4. Remortgaging Will Dominate the Agenda

If your fixed-rate mortgage ends in 2025, remortgaging will likely be a top priority. Homeowners who locked in low five-year rates in 2020 may face higher costs, while those with two-year fixed rates from 2022 or 2023 might see their monthly payments fall. 

Mortgage experts say that 2025 will bring mixed results: some will see higher payments as they move off low-rate deals from 2020, whereas others will benefit from lower costs as they roll off higher two-year rates. Remortgaging will be a major focus for lenders, leading to competitive deals and new products.

5. London May See a Resurgence

London's housing market has lagged behind the rest of the UK in recent years, with prices rising only 12% in the previous five years compared with the national average of 21%.

However, that could change in 2025. Factors like the return to office-based work for some companies and renewed interest from international buyers are expected to lift demand. Experts believe London's price growth could match or even slightly surpass the national average next year.

Conclusion

Whether you are buying, selling, or planning to remortgage in 2025, there will be opportunities and hurdles. Remember that though those predictions can guide you, the housing market is always changing and affected by many factors.

Stay adaptable, seek expert advice, and take advantage of opportunities as they arise.