Outlook for mortgage market in 2025 is optimistic says expert Andrew Milnes

When we compare the average for inflation in 2025, which is projected to be 2.5 per cent, to the 7.25 per cent average in 2024, we’re certainly in a much calmer climate than we were 12 months ago. However, we’ll have to bear in mind that this is subject to no further escalation in terms of global conflict, which would cause a spike.

Provided that inflation stays on an even keel, there should be scope for further rate reductions over the next 12 months. Hopefully, the worst of it is behind us and there won’t be any surprises from the Bank of England further down the line.

Given these conditions, it would be great to see some consistency in terms of house price growth for existing homeowners this year. A gradual upward spiral in this area isn’t a bad thing – if anything, it will entice more activity in the market, getting more people moving again.

Another reason to be positive is the amount of innovation we’ve seen from lenders this year. An increasing number of lenders are looking at ways in which they can lend more money to more people, making homeownership more accessible. There are a range of mortgage products geared specifically to first time buyers, helping them to overcome some of the common challenges they may face.

However, we can always be doing more, especially when it comes to the first time buyer market. Mortgage Advice Bureau’s research found that 29 per cent of first time buyers cited mortgage rates as being one of the biggest blockers to buying. It’s clear that this demographic needs our support more than ever, and all eyes are on lenders to continue to innovate in new and exciting ways.

While there are so many reasons for us to be positive this year, the imminent changes to Stamp Duty thresholds have the potential to place the market at a cliff edge. From 1 April 2025, homebuyers will have to pay Stamp Duty on any property over the value of £125,000, and landlords will have to spend an extra five per cent on second property purchases.

Not only could this make homeownership inaccessible to more first time buyers, it could also discourage landlords from expanding their property portfolios. Whilst it’s something that’s been mooted for several years, the time has come for a long overdue overhaul of the Stamp Duty regime, as doing so could help boost market activity. It may be an unlikely scenario, but it’s one that could make the world of difference to so many.

Andrew Milnes is head of the Mortgage Advice Bureau, Bingley, 01274 891312