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Optimism in the UK housing market at the beginning of 2025

The number of homes newly listed on the market in 2025 has increased by 11 per cent compared to last year, despite ongoing uncertainties about interest rates and stamp duty.

A record number of new sellers have entered the market, whilst average prices and sales agreements have also risen, suggesting a busier 2025.

To help you understand the current state of the market, our Senior Conveyancing Executive Louise Brough has provided a summary of the latest findings.

Rising property prices

Significant Price Increase According to Rightmove, the average property price rose by 1.7 per cent (£5,992) this month to £366,189, marking the largest January increase since 2020.

The price rise this month is more pronounced, driven by buyers’ willingness to bid due to falling interest rates and inflation dropping to 2.5 per cent in November.

The importance of exercising caution in the housing market

Interest Rate Cuts and Stamp Duty Change Uncertainties remain, such as the speed and frequency of interest rate cuts by the Bank of England and the effects of stamp duty changes starting 1 April, impacting smaller homes typically purchased by first-time buyers.

Impact on First-Time Buyers in more affordable regions of England will largely remain unaffected by the reduction of the tax-free threshold to £300,000 starting in April.

However, those purchasing properties above this threshold will face higher stamp duty charges in pricier areas, unless additional support for first-time buyers is introduced soon, according to Rightmove.

“This could mean the market may slow down in April when the new legislation is introduced,” explained Louise.

Mortgage rates remain high

Current Mortgage Rates Mortgage rates have remained high, with fixed-rate deals below 4 per cent nearly disappearing in recent months.

Rightmove’s weekly mortgage tracker shows the average five-year fixed mortgage rate is now 4.75 per cent, slightly down from last year’s 4.78 per cent.

The average two-year fixed mortgage rate has also improved slightly to 4.97 per cent, from 5.08 per cent last year.

Interest rate expectations

Following a surprising drop in UK inflation in December and minimal economic growth in November, interest rate expectations in financial markets have shifted.

Markets are now anticipating two or three quarter-point rate cuts this year.

However, a recent sell-off in UK and other government bonds caused their yields to spike, though those increases were later reversed in a volatile week.

Louise said: “Demand is expected to come under pressure in the coming months due to higher borrowing costs affecting mortgages.”

“Besides the rate cuts by the Bank of England, developments in markets during the initial weeks of Donald Trump’s presidency is likely to influence UK house prices this year.”

The housing market is ever-changing. Both sellers and buyers must keep up to date with the latest market trends and legislation to make the most of their money.

Looking to buy or sell a property in 2025? Get in touch for expert legal guidance from our team.

Elizabeth Jennings

Director - Commercial Property & Charities

I joined Mander Hadley in 2004, qualified as a solicitor in 2006 and have focussed on commercial law throughout. I am also a member of Coventry and Warwickshire First and Warwickshire Law Society.

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