The UK property market is undergoing notable changes as we move into Spring 2025. From government reforms aimed at increasing housebuilding, to fluctuations in interest and mortgage rates, various factors are shaping the landscape. This article combines insights from recent reports to provide a comprehensive overview of the current state of the market.
Lower Growth but More Homes
The recent Spring Statement delivered by Chancellor Rachel Reeves (26th March) highlighted a mixed outlook for the UK economy. The Office for Budget Responsibility (OBR) has approved the Government’s planning reforms, predicting that housebuilding will reach its highest level in over 40 years. The Government aims to build an additional 1.3 million homes by the end of this parliament, although this falls short of the 1.5 million target in their manifesto. Despite this positive news for housing, economic growth forecasts have been cut from 2% to 1%, and inflation is expected to rise to 3.2% by the end of the year.
February Property Sales Hit Three-Year High
HMRC data reveals that February 2025 saw the highest number of property sales in three years, with 108,250 residential transactions recorded. This represents a 28% increase compared to February 2024 and a 13% rise from January 2025. The surge in sales is attributed to changes in Stamp Duty, which have motivated buyers to complete transactions before the new rates take effect. Experts predict that UK house prices will rise by 2.5% this year.
Interest Rates and Mortgage Rates Update
The Bank of England has held the Base Rate at 4.75% this month (20th March), following two cuts earlier in the year. Mortgage rates have remained relatively steady, with predictions that they will continue to edge down throughout 2025. As of March 2025, the average rates for 2-year and 5-year fixed-rate mortgages are 4.88% and 4.74%, respectively. These rates have seen slight decreases compared to the previous week. For homebuyers with 5-10% deposits, the average 2-year fixed rate is 5.66%, and the 5-year fixed rate is 5.36%.
Experts predict the Base Rate could fall to around 3.75% in 2025, depending on various economic factors.
House Price Index
Zoopla’s latest House Price Index indicates that the UK housing market remains resilient, supported by faster growth in average earnings. Sales agreed are up 10% year-on-year, with 11% more homes coming to market. House price inflation has dipped slightly to 1.9%, with the average UK house price now at £267,200. The value of houses has increased by 24% over the last five years, while flats have seen a 7% growth. Despite the lower prices of flats, buyers continue to prioritise houses.
Summary
The UK property market is experiencing significant activity and changes, driven by government reforms, economic factors, and shifts in buyer behaviour. With more homes being built, high property sales, and fluctuating interest and mortgage rates, the market is poised for an eventful year ahead.