UK Finance housing and mortgage market forecasts 2025: "Loving the optimism"

This is a pretty optimistic prediction but it makes sense given the expectation that rates will get cheaper and the Bank of England base rate should come down. There are no guarantees in the mortgage industry but a prolonged period of financial stability would be welcome. The Budget was not business- or first-time buyer-friendly and the stamp duty price hike was designed to get even more tax out of the property sector. The number of borrowers sticking with their existing bank or building society rather than remortgaging to another lender is incredible and set to get even bigger. Many homeowners are not even looking at the rates available across the market or whether they are getting the best deal when they agree to stay with their mortgage provider. This means they may not be getting the most suitable or cheapest product.

While it’s encouraging to see UK Finance projecting increased activity in the mortgage market for 2025, I believe the forecasts may be overly optimistic given the current economic challenges. The report appears to underplay the impact of a sluggish economy, ongoing cost-of-living pressures, and the potential fallout from external factors such as geopolitical tensions, Trump trade wars and political instability. These risks could significantly dampen consumer confidence and borrowing capacity, leading to a slower recovery than expected. Additionally, affordability remains a pressing issue, with high interest rates continuing to strain household budgets. Without a more cautious consideration of these challenges, there’s a risk that the forecasts could set unrealistic expectations for market recovery. For the market to truly rebound, policymakers and lenders must work collaboratively to address these structural challenges, ensuring affordability and stability for both buyers and lenders.