Affordability crisis deepens despite price uptick
As we head on into 2025, for brokers, buyers and sellers it’s been a chaotic 12 months. Inflation exceeded expectations, rates have risen and first time-buyers continue to struggle to make it on to the property ladder. However, a rise of 1.2% in UK house prices month on month this November could be a sign of better things to come in the New Year.
Total mortgage lending is projected to reach £207 billion by 2025, with homeowner house purchases comprising the largest segment at £123 billion, according to Statista, encased in 1.2 million property sales – signifying a marked uptick in interest.
In that vein, Mortgage Introducer sat down with top UK mortgage brokers to pick their brains over what the next few months will bring. Let us know your thoughts and predictions in the comments below.
Marthar Mutinda Scott (pictured top, left), Mortgage Spot
As inflation eases, I anticipate a reduction in interest rates, which could lead to more affordable mortgage deals. More clients will start considering the trade-off between fixed and variable-rate mortgages and opt for variable or short-term mortgage products as interest rate fluctuations remain uncertain.
Without the support of government deposit schemes, many individuals, especially those with lower incomes or limited savings, will find it significantly more difficult to save for a substantial deposit. This will hinder their ability to get on the property ladder, hence exacerbating existing socioeconomic inequalities.
Rising house prices and interest rates could pose challenges for first-time buyers, particularly in high-demand areas like Edinburgh, so I anticipate that more clients will be moving further from the city centre to secure affordable homes.
Lenders are likely to introduce more flexible mortgage products, such as those tailored to non-standard clients like foreign economic migrants who don’t have permanent residency status. I anticipate an increase in remortgage activity as a significant number of fixed-rate deals mature in 2025. Growing environmental awareness and government incentives may drive demand for green mortgages, offering lower interest rates for energy-efficient homes.
I also anticipate an influx in insurance applications as more clients explore the need to insulate themselves and their dependents against unforeseen circumstances which might have a negative impact on their financial wellbeing.
Ceri Evans (pictured top, centre), Remoo Mortgages
In the past three years, we’ve noticed a significant growth in sole trader and limited company director applications to remortgage or buy homes, given so many people chose to become their own bosses during COVID, I think this is a trend that will continue in 2025.
In a related way, we’ll also see a number of people coming off five-year fixed rates that they entered at the end of 2019 or during 2020. Some of these people will have been furloughed or lost part or all of their income during COVID and, as a result, experienced periods of financial difficulty. So I believe we’ll continue to see applicants who may not have the sort of credit profiles that fit with most high street lenders. The likes of Principality, Accord & Leeds, who can flex criteria in certain circumstances and Kensington, Foundation, Pepper, and Bluestone who specialise in this area, are all ready and waiting to assist borrowers with more complex credit issues. Lenders who provide underwriter access will become more important than ever.
For us, as a specialist residential firm, this means we’re expecting another busy year, as our key areas of focus continue to grow. Having said that, I do see clients with minor blips related to their mortgage, perhaps a single late or missed payments as particularly challenging. I’d like to see all lenders be more flexible and open to accepting explanations for clients, who may have been in that sort of position in the last couple of years, more so if it’s in the last year or so.
Michelle Niziol (pictured top, right), Bespoke Property Investment
One major trend I anticipate is the widespread adoption of technologies such as AI and blockchain, which will streamline transactions, enhance customer experiences, and improve transparency.
Additionally, virtual and augmented reality tools will play an increasingly significant role in property viewings, allowing clients to explore options remotely with greater ease. Sustainability will continue to be a key focus. More buyers are likely to prioritise energy-efficient homes and sustainable building practices. Governments and developers are expected to push further toward net-zero initiatives, driving innovations in materials and design. However, challenges will persist, including navigating fluctuating interest rates and economic uncertainty.
Affordability will remain a critical issue, particularly in urban areas where demand far exceeds supply. It will be essential for industry leaders to devise creative solutions that balance profitability with affordability to meet the needs of first-time buyers and diverse demographics.
Jimmy Ireland (pictured immediately below), Mortgage Focus
I see rates into next year taking a downwards trajectory, albeit very slowly. I don’t think we’re going to see sub 3% rates for the foreseeable future. I believe we will continue to see longer term fixed rate products at a better rate than shorter term fixed rates. Many of the lenders will also continue to reduce their renewal windows from six months down to around three months, due to reducing rates. Clients are procrastinating on their renewals as they feel rates will reduce, however, as we have seen in the last few weeks, rates have increased and so being able to convince clients to “stick a pin” in a rate and watch the market from a position of safety is the best option.
I think that Bank of England base rate predictions of being around 3.5% or lower by the end of next year is possibly not going to happen unless we can get to grips with inflation and the current economic climate.
House prices will still continue to climb, albeit slowly, however this will still price a lot of home movers and first-time buyers out. Although this may change as BTL landlords sell their properties due to the rules imposed on them by Westminster and so this could saturate the market and bring down property prices while simultaneously having a detrimental effect on rental prices. Next year, I feel, is going to be a very boring year I’m afraid, stagnant house prices, stagnant rates which, after the massive fluctuations over the last couple of years, isn’t a bad thing.
What are you expecting to see in the mortgage mart in 2025? Tell us in the comments.
