Pace of rate cuts to shape 2025 market outlook
The average asking price for properties listed on the market in the UK fell by 1.4% this month, equivalent to £5,366, bringing the average price to £366,592, according to the latest Rightmove House Price Index.
The price decline marks the second consecutive month of steeper-than-usual price drops, with the typical seasonal decrease for this time of year averaging 0.8%. Analysts suggest that pre-Budget jitters have transitioned into post-Budget disappointment, contributing to a larger-than-normal seasonal slowdown in pricing as the Christmas period approaches.
While the Budget dampened sentiment in some areas, the broader picture of market activity remains relatively strong compared to last year. A second Bank of England base rate cut, announced after the Budget, appears to have provided a modest boost to buyer demand, with Rightmove reporting early signs of renewed interest from prospective buyers.
Despite ongoing economic uncertainties, Rightmove predicts that average asking prices for new listings will rise by 4% in 2025, driven by sustained market activity and optimism around further reductions in mortgage rates.
Rightmove’s data also reveals a positive trajectory in sales activity compared to 2023, with the number of agreed sales up 26% year-on-year. Similarly, the number of new sellers entering the market is 6% higher than the same period last year. However, the market remains price-sensitive, as buyers continue to face affordability constraints despite hopes for improved mortgage rates in the coming year.
Buyer demand has also shown volatility following external economic events. Before the Autumn Budget, buyer inquiries were 23% higher than the same period in 2023. This figure dropped to 18% after the Budget but has since recovered to pre-Budget levels following the bank rate cut. However, as the festive season approaches, a typical slowdown in market activity is anticipated.
“There’s been a lot of news to digest for home movers over the last few weeks, and it appears that the market may still be chewing it over,” said Tim Bannister (pictured), director of property science at Rightmove.
“Buyer demand dropped off in the lead-up to and immediately after the Budget, which confirmed increased stamp duty charges for most home movers, second-home buyers, and some first-time buyers. However, the second bank rate cut and optimism for 2025 have reversed this trend, at least temporarily.
“Looking at the bigger picture, activity levels remain higher than at this time last year, setting us up for what we expect will be a stronger 2025. We anticipate improvements in both prices and transaction volumes, particularly if mortgage rates fall far enough to significantly improve affordability for the broader market.”
Rightmove forecasts a 4% rise in average asking prices next year, the company’s most optimistic projection since 2021. Expectations are bolstered by the potential for lower mortgage rates and pent-up demand from buyers who delayed moves due to affordability pressures. A surge in completed sales is also anticipated ahead of the Stamp Duty deadline at the end of March 2025.
However, sellers face increasing competition, with the average number of homes for sale per estate agent branch now at its highest level for this time of year since 2014. Bannister advised that sellers must remain realistic with pricing, noting that buyers are not only price-conscious but also have a wider selection of homes to choose from.
“Sellers will still need to price temptingly enough to secure a buyer while the choice of homes for sale remains high,” Bannister said. “Affordability is still stretched for many, especially with the slowing rate of wage growth and higher National Insurance contributions introduced in the Budget.”
While Rightmove’s data points to a more active market in 2025, the pace of mortgage rate reductions will play a critical role in shaping the year ahead. Bannister added that the traditionally busy periods for home sales could hinge on how quickly affordability improves.
“The market momentum we’ve seen this year is likely to continue into 2025, particularly if mortgage rates drop enough to bring sidelined movers back into the market,” Bannister said. “However, twists and turns are still likely, and sellers will need to stay competitive to secure buyers.”
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