Posted on Thursday, December 12, 2024
Rightmove predicts national average asking prices will rise by 4% in 2025. Whilst this is Rightmove’s largest prediction for price growth since 2021, it’s in-line with average long-term price growth.
The Covid influenced years of 2020, 2021 and 2022 saw larger increases in prices. One factor for this was the imbalance between supply and demand – there was a lot of pandemic-driven demand for property, while supply was constrained.
The average number of available homes per estate agent branch is at its highest for this time of year in 10 years, so while the number of buyers in the market is significantly higher than this time last year, they’re often spoilt for choice.
Rightmove expects the number of homes for sale to remain high next year, which means strong competition will remain for sellers, which will likely prevent higher price growth. However, these factors will also help agreed sales, and Rightmove anticipates a higher number of transactions in 2025.
Mortgages
Rightmove predicts that the average five-year fixed, and two-year fixed mortgage rate, are likely to be around 4.0% by the end of next year, based on current market trends.
This is lower than the current 4.83% and 5.08% for the five-year and two-year fixed rates respectively and it will help improve affordability and further boost consumer confidence. There may be room for rates to come down a bit more in 2026, but we will not see a return to the historically low rates seen prior to the cost-of-living crisis. The future path of mortgage rates, even in 2025, is difficult to forecast as they are greatly dependent on the impact of a wide variety of unpredictable factors, including geo-political tensions and inflation.
During this period two-year fixed rate mortgages are likely to become even more popular as the gap closes with five-year fixed rates, and it becomes less attractive to fix for longer. Two-year fixed rates have been the more expensive option over the last couple of years, but the gap is currently the smallest it’s been this year. This is reflected in UK Finance data, where the gap in proportion of people taking out a two-year versus a five-year fixed rate mortgage has closed compared with last year.
First-time buyers
The rate at which stamp duty is paid for both first-time buyers and home-movers in England is set to lower from 1 April. The impact could mean thousands of pounds extra in moving costs, and Rightmove’s real-time data has already identified a rush from some first-time buyers in expensive areas to try and complete before then, and potentially avoid any, or higher fees.
However, while this is likely to pull forward some planned moves, in many areas of England there is still a high availability of homes that would fall under the £300,000 threshold for first-time buyers. They would also benefit from a large tax advantage over second home buyers and most trader-uppers.
The number of first-time buyers that are active in the market and sending enquiries to agents is 13% ahead of the same period last year. With buyer affordability continuing to improve next year, and rents still rising, Rightmove predicts it will be an active year for this market sector.
It is set to be an important year for remortgaging for lenders, with many home-movers in different circumstances coming to the end of their fixed-rate deal. There will be many movers who fixed for five years during the pandemic frenzy market of 2020, who may now face higher mortgage costs.
For example, someone who took out the average five-year fixed rate at this time in 2020 of 2.55%, would currently be looking at an average remortgage rate of 4.89% for another five-year deal.
By contrast, there will be other movers rolling off a post-mini-Budget era two-year fixed rate mortgage who will now see lower costs.
Someone who took out the average two-year fixed rate at this time in 2023 of 5.48%, would currently be looking at an average remortgage rate of 5.19% for another two-year deal.
The result of this is that the market for remortgaging and product transfers is likely to be a big focus for lenders in 2025 as they look to attract home-movers with their product offerings.
If you're considering moving home in 2025, contact your local branch to get an up-to-date market appraisal of your property. We also partner with independent mortgage brokers with a holistic view of the whole of the market, and we can put you in touch to discuss all your options under one roof.