National average asking prices will rise by 4% in 2025 and around 1.15. million homes are expected to be sold, according to property platform Rightmove (RMV.L).
A panel of experts from the property site predicted that the average five-year fixed and two-year fixed mortgage rate are likely to be around 4% by the end of next year.
This is lower than the current 4.83% and 5.08% for the five-year and two-year fixed rates respectively. The anticipated rate cuts, driven by multiple base rate reductions, are expected to improve affordability for homebuyers and boost consumer confidence.
However, the future of mortgage rates remains uncertain, dependent on factors such as inflation and geopolitical tensions. Despite the expected improvements, mortgage rates are unlikely to return to the historically low levels seen prior to the cost of living crisis.
Matt Smith, Rightmove's mortgage expert, said: "It is likely to be a mixed year for the market. Those who took out peak-mortgage rate two-year fixes after the mini-budget will see their deal come to an end and will likely find themselves with lower costs next year. Combined with wage growth, they may feel some significant affordability improvements.
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"By contrast, many movers will be rolling off a relatively low five-year fixed rate agreed during the busy market of 2020 and will see costs rise."
Homeowners who took out two-year fixed rates during the post-mini-budget period of 2023 will likely see their costs fall, as current remortgage rates for two-year fixed deals are averaging 5.19%. As many borrowers face rate resets in 2025, remortgaging will become a key focus for lenders.
Rightmove also noted that the gap between two-year and five-year fixed rates has narrowed considerably, making shorter-term options more attractive for many buyers. In 2025, two-year fixed mortgages are expected to become even more popular, as the affordability of long-term fixed rates becomes less compelling.
When it comes to house prices, Rightmove's prediction that the average asking price for new homes will rise by 4% by the end of 2025 marks the largest predicted increase in prices since 2021, although it's significantly lower than the jumps witnessed during the pandemic years.
Rightmove predicts that 2025 could signal the start of a price recovery for London which, for the past few years, has lagged behind the rest of the country in terms of price growth. While the average asking price in London has risen by 12% over the past five years, it still trails the national average, which has increased by 21%.