Expect busy property market at start of 2025 ahead of major stamp duty changes: Sarah Coles
Tortoises take to their boxes of shredded paper, bats to the eaves, and property buyers traditionally retreat to the sofa to wait out the winter period. This year seems to be bucking the trend though, with buyer numbers and mortgage approvals rising, and prices rises hitting a post-pandemic high in October. It’s no wonder that so many people are wondering what’s going on, and what happens next.
Knowing where you stand is always a bit tricky, because the official figures show details of property completions, which builds in an enormous lag. It means the price data in November covered September completions – of sales agreed as early as July. It’s hardly a handy indication of how buyers feel right now. The other indices are less comprehensive, and use different calculations, so can disagree with one another. However, they measure at the approvals stage, so there’s less of a lag.
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Hide AdLeaving aside the areas where the smaller indices disagree, 2024 was effectively a year of modest improvements, which saw annual price growth return to positive territory - despite a few months of stagnation in the middle. The market was boosted by mortgage rate drops early in the year, it then suffered a little in the early summer when the market started to price in slower rate cuts. Things turned again in the autumn, after two rate cuts, and the year looks set to finish stronger. Bank of England data from October showed mortgage approvals for house purchases were at their highest point in over two years.


Knowing where we stand isn’t an exact science, but forecasting ahead into 2025 really gets into the realm of the unknown. Bearing that in mind, three things are likely to have an impact.
We might see more growth in first three months, because the stamp duty holiday is ending on 31 March. Since September 2022, the stamp duty threshold has been raised from £125,000 to £250,000. The threshold for first-time buyers was also increased from £300,000 to £425,000 – and the maximum that a property can be worth and still benefit from this relief rose to £625,000 (up from £500,000). At the end of March, the thresholds will revert.
It's likely to boost demand this side of the deadline, as buyers rush purchases through in order to take advantage of the tax saving. It’s unlikely to have anything like the same impact as the stamp duty holiday during the pandemic, but it will have an effect. It should mean sales and prices get a boost in the first three months of the year.
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Hide AdOnce the deadline passes, we can expect a lull. The question is whether that’s a brief phenomenon, or it ends up taking hold. One thing making a longer lull more likely is house prices themselves. The fact that they’re now just 1% below their pandemic peak means more people are being priced out of a purchase – especially given that mortgage rates are still relatively high. If the stamp duty holiday pushes prices up further, it’s only going to exacerbate the problem.
However, there are a couple of things working in the market’s favour, that could snap it out of a lull sooner rather than later. Wages have covered some ground in catching up in the months since the last time property prices peaked, so on paper, affordability has been improving. Of course, not everyone is benefitting equally, so there will still be some buyers stuck on the sidelines as house prices rise out of reach.
The other positive is that we’re still expecting mortgage rates to ease gradually. This isn’t likely to happen overnight, but the market expects interest rates to end 2025 round about 4% - down from 4.75% today. They’re heading slowly in the right direction, which is likely to mean mortgages go down from here rather than up. Nobody is expecting a runaway property market in 2025, so early predictions are that we get something that looks a bit like this year, and possibly marginally better, ending the year around 4% higher.
It's worth emphasising the fact that none of these things are set in stone. If we get lower economic growth than expected, we could see rate expectations fall, whereas if we see inflation reignite, they’ll rise. The last few years have taught us that there’s always the chance of a bolt out of the blue too. We could, for example, be hit by geopolitical unrest around the world. It could mean we lose confidence and put house purchases on hold. It could also push up the oil price, feed more inflation, and force interest rates up, so mortgages get horribly expensive again. None of this is expected, but we can never rule it out.
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Hide AdIt means forecasts are useful to show roughly what direction we’re likely to be heading in, but there’s a real risk in pinning your plans on these things. If you’re thinking of buying, selling, remortgaging or downsizing, timing the market will be as difficult as ever. The key will be to do the right thing for your finances today, rather than trying to second-guess what they’re likely to do tomorrow.
NS&I cuts
Another week has seen another fall in NS&I rates – this time it has pulled 5-year bonds and issued new 2- and 3-year British Savings Bonds with lower interest rates. NS&I has an obligation not to be too far ahead of its competitors, so cuts right across the savings market were always going to put it under pressure. However, the deals weren’t much to write home about in the first place. There are still a huge number of accounts paying more than 4.5% over two years, and seven offering the same over three years, so even at 4.1% and 4%, these bonds were well below the best on offer. Now they’re downright disappointing.
This is likely to mean the organisation has decided it’s ahead of the game on fundraising, so it can afford to make these products less attractive, because it’s not in the business of attracting more cash. This isn’t a huge shock. We’ve seen a boom in saving across the board, including a golden October , which saw us tucking money away in accounts at a faster rate than any other month on record outside the pandemic.
However, it will be a disappointment for loyal customers planning to tie their cash up and protect it from future rate cuts. It means savers need to seriously consider whether NS&I is the right home for their cash right now. You can currently make more than 5% on easy access savings, up to 4.8% over one year, and 4.6% over two, three and five years. There’s no need to settle for disappointing rates from anyone – even NS&I.
SARAH COLES Head of Personal Finance and Podcast Host for Switch Your Money On Headline Money Press Team of the Year Hargreaves Lansdown
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