Predictions hint at declining rates but warn of challenges for millions of homeowners
After a year of shifting mortgage rates and economic adjustments, UK homebuyers and homeowners are looking to 2025 for stability. According to experts interviewed by The Sun, mortgage rates may see some relief next year, but the scale of reductions will largely depend on inflation trends.
The past year saw average two-year fixed mortgage rates fluctuate from 5.93% in January to 5.95% by summer, while five-year fixed rates ranged between 5.55% and 5.53%. These changes were driven by volatile swap rates, inflation trends, and the Bank of England’s decision to lower its base interest rate to 4.75% in August.
Looking ahead, financial experts predict a gradual easing of mortgage rates as inflation stabilises. However, affordability challenges persist, especially for first-time buyers and those facing the end of low-interest mortgage deals.
Nicholas Mendes, mortgage technical manager at John Charcol, highlighted the critical role of swap rates, explaining: “When swap rates rise - typically due to expectations of fewer interest rate cuts -mortgage rates often follow suit, even if the base bank rate is reduced.”
For homeowners nearing the end of fixed-term deals, David Hollingworth of L&C Mortgages advised preparing early to avoid the higher costs of defaulting to a lender’s standard variable rate (SVR). He suggested beginning the search for new deals three to four months before a term expires.
House prices are expected to remain in flux next year, with a potential surge in demand early in the year as buyers seek to finalise deals before stamp duty relief expires in April. After this period, growth may slow, though Zoopla forecasts a modest 2.5% increase in property values, with northern regions likely to outperform the South.
First-time buyers face additional challenges as affordability barriers persist. Rising rents and cost-of-living pressures have made saving for a deposit more difficult, and upcoming changes to stamp duty could increase costs. From April, the “nil rate” band for first-time buyers will drop from £425,000 to £300,000, potentially adding thousands to upfront expenses.
Experts recommend acting quickly to navigate these challenges. “Getting on the housing ladder is generally a good move if it’s affordable, as it allows buyers to build equity over time,” one analyst told The Sun.
Meanwhile, homeowners nearing the end of their fixed terms are encouraged to shop around for competitive rates or consider product transfers with their current lenders to manage costs effectively.
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