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3 insightful property market predictions for 2025

Published: January 8, 2025 by Jennifer Armstrong

Key changes, like interest rates falling and Stamp Duty thresholds changing, are likely to affect the property market in 2025.

Whether you’re buying, selling, or simply interested in how the value of your home might change over the next 12 months, read on to discover three insightful property market predictions for the year ahead.

1. Stamp Duty changes are expected to boost property transactions at the start of the year

In the Autumn Budget, chancellor Rachel Reeves announced the temporary higher thresholds for paying Stamp Duty would end in April 2025.

Stamp Duty is a type of tax you pay when you purchase property or land. The higher threshold has meant many families have benefited from paying a lower rate or even avoiding the tax completely. With the threshold lowering in April 2025, the number of property transactions concluded during the first quarter of the year is expected to be high.

In fact, Zoopla predicts there will be a 5% increase in sales across 2025 to 1.15 million.

One of the key reasons driving this boost is the changes to Stamp Duty, which will encourage first-time buyers and home movers to purchase property before the deadline.

It could be good news for sellers, as you may find interest in your property rises and buyers are more motivated to complete transactions quickly.

2. Interest rates are predicted to fall but at a slower pace than earlier forecasts

When inflation was high, the Bank of England (BoE) increased its base interest rate throughout 2022 and 2023 in a bid to slow it down.

For many families with a mortgage, this meant their mortgage repayments increased. In 2024, the central bank started to reduce the interest rate as inflation stabilised. As of December 2024, the base interest rate was 4.75%.

Previously, many experts were predicting the BoE would make regular cuts to the base interest rate toward the end of 2024 and throughout 2025.

However, statistics from the Office for National Statistics (ONS) show the rate of inflation increased in the 12 months to November 2024 to 2.6%, compared to 2.3% a month earlier. This partly led to the BoE choosing to hold the base interest rate in December 2024.

So, will interest rates fall in 2025 as predicted?

It’s good news for mortgage holders as many experts still agree that interest rates will fall in 2025, but perhaps at a slower pace than earlier predictions suggested.

Indeed, according to MoneyWeek, BoE governor Andrew Bailey suggested the bank could cut interest rates four times in 2025.  Recently, when changing the base rate, the bank has made an increase or decrease of 25 basis points. If it continued to follow this pattern, that would lead to an interest rate of 3.75% by the end of 2025.

3. Improving conditions for households could lead to property prices rising

Interest rates falling would make mortgage repayments more affordable for many families. In turn, this could lead to property prices rising.

In addition, strong wage growth could support the market too. According to the ONS, annual growth in employee’s average earnings was 5.2% for the period from August to October 2024. With wages now growing at a faster pace than inflation, more families might feel financially secure enough to move up the property ladder or aspiring homeowners could find they’re now in a better position to secure a mortgage.

Property firm Savills now predicts that property prices will rise by 3.5% in 2025, leading to an average property price of £302,500. It expects the boom to continue over the next few years too.

Between 2024 and 2028, it predicts that property prices will increase by 21.6%, leading to an average property price of £346,500 by the end of the forecast period.

Will you be taking out a mortgage in 2025?

If you’ll be taking out a new mortgage deal in 2025, we could help you find one that’s right for you. Whether you’re moving home or your current deal is set to expire, finding a competitive deal could save you money.

Get in touch with us to find out how we may help you find a mortgage.

Please note:

This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.

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