Improving mortgage affordability set to boost property market activity in 2025

The latest research by estate agent comparison site, GetAgent.co.uk, suggests that should mortgage rates fall to below three percent by the middle of next year as forecast, the UK property market could see a further boost in buyer sentiment and market activity, as the average cost of a first-time buyer mortgage would fall by more than £12,000 a year.

Governor of the Bank of England, Andrew Bailey, has suggested that the Bank of England will become more aggressive with cutting interest rates in the coming months, which has led mortgage experts to suggest that mortgage rates could fall to as low as 2.75% by the middle of 2025.

The research by GetAgent* shows that, as it stands, the average homebuyer is paying £1,164 per month when making a full monthly mortgage repayment based on the current average rate of 4.14%.

This is based on a mortgage loan requirement of £217,292 having placed a 25% deposit on the current average UK house price of £289,723.

With the market having turned a corner and house prices on the rise, GetAgent estimates that the same buyer looking to make their move in the middle of next year will likely have to contend with a higher cost of climbing the ladder.

In fact, GetAgent estimates that the average UK house price could increase by 3.2% or £9,143, but despite this increase, the monthly cost of a mortgage would be more manageable due to the forecasted reduction in mortgage rates.

At an average rate of 2.75%, the same mortgage at a 75% LTV would see the average homebuyer pay just £1,034 per month.

This marks an 11.2% reduction versus the cost of borrowing today,  a saving of £130 per month when making a full monthly mortgage repayment – totalling £12,408 per year.

Co-founder and CEO of GetAgent.co.uk, Colby Short, commented:

“We’ve seen a strong uplift in buyer activity so far in 2024 by way of consistently strong mortgage approval levels and our recent research found that this has finally started to filter through with respect to transactions, with monthly sales volumes topping 100,000 in August for the first time since December 2022.

However, it’s fair to say that buyer activity remains somewhat restrained due to the higher cost of borrowing, with the base rate remaining substantially higher than many buyers have become accustomed to in recent years at five percent.

The good news is that the Bank of England has been vocal in its intentions to further cut rates before the year is out and this should see mortgage rates follow suit, with the potential they could fall to sub-three percent by the middle of 2025.

For sellers, this means more demand and buyers acting with greater confidence due to improved affordability, which, in turn, should help cultivate further positive house price growth in 2025.”