HOUSE THAT
UK house prices predicted to rise in 2025 at highest rate in four years despite November dip after Budget
Watch our video to find out how you can get the best deal on your mortgage
HOUSE prices are predicted to rise next year at their highest rate in four years, despite a dip this month following the recent Budget.
The average price tag on a home fell by more than £5,000 in November, according to the latest figures from Rightmove out today.
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Across the UK, the typical asking price for a home coming onto the market is £366,592, down by 1.4% or £5,366 month-on-month, the housing website said.
The usual drop seen at this time of year is 0.8%.
Rightmove publishes monthly house price data based on asking prices from the property listings on its website, though properties could still sell for more or less.
November marks the second month in a row that price growth has been weaker than normal.
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In October, prices increased by 0.3%, which was down on the typical 1.3% rise for that month.
Activity in the housing market was hit in both months by the Budget.
Buyers were holding off in the lead up the Autumn Statement in case there were changes affecting the market.
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These "pre-Budget jitters" turned into "post-Budget disappointment" Rightmove said, "creating new challenges for the housing market and appear to have caused a larger-than-normal seasonal slowdown in pricing as we head towards Christmas."
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The Budget confirmed stamp duty thresholds will rise next spring as a holiday for first-time buyers comes to an end.
Chancellor Rachel Reeves also announced second-home buyers will face a stamp duty rate rise of two percentage points – from 3% to 5%.
Tim Bannister, Rightmove's director of property science said: "We had been seeing a drop-off in buyer demand, both in the lead-up to the Budget and in its immediate aftermath, as it was confirmed that there will be an increase to stamp-duty charges for most home-movers and second- home buyers, and some first-time buyers.
"However, a second bank rate cut and a boost of optimism regarding 2025 appear to have reversed this trend at least temporarily."
The Bank of England (BoE) went ahead with a base base rate cut on November 7, a week after the Budget, from 5% to 4.75%.
The rate is used by lenders to set interest rates offered on savings and borrowing - including mortgages.
But the Budget dampened expectations for further rate cuts due to other measures announced that are expected to push up inflation.
Rates are still expected to fall next year but at a slower pace then previously thought.
What will happen to house prices in 2025?
Despite the Budget dip, Rightmove anticipates that asking prices will increase by 4% across 2025.
This is its highest prediction for increases in prices since 2021 and comes as a result of improving buyer affordability and the release of some pent-up demand.
This is expected to put modest upwards pressure on prices next year.
It also expect a surge in the number of completed sales in March next year to beat the Stamp Duty deadline at the end of that month.
However this will be tempered by an expectation that sellers will still price properties to attract buyers who are "spoilt for choice".
It said that seller competition to find a buyer is intense, with the average number of homes for sale per estate agent branch at its highest level for the time of year since 2014.
Buyers are also being stretched on affordability, especially with a slow-down expected in the rate of wage growth, following the National Insurance increases in the Budget, Rightmove said.
National Insurance contributions will rise for employers, not staff. But the extra cost to businesses is expected to have a knock on affect on pay rises and jobs.
Tim said: "We now predict that we’ll see a stronger year for prices in 2025.
"The signs are that the market momentum we’ve been seeing this year will continue into next year, especially if mortgage rates drop to a level that gives greater affordability to some movers who have been waiting in the wings until now.
"However, we still expect some twists and turns next year.
"The speed at which mortgage rates come down next year will be key in determining activity levels for some of the market’s traditionally busiest periods, and sellers will still need to price temptingly enough to secure a buyer while the choice of homes for sale remains as high as it is right now.”
What it means for you
Generally, higher mortgage rates deter buyers, which can have a knock-on effect on house prices as demand falls.
Lower mortgage rates help buyers as it means their monthly mortgage repayments are smaller.
Interest rates have risen from historic lows of 0.1% in December 2021, and peaked at 5.25% in July 2023, as part of efforts to reduce inflation to the BoE's 2% target.
This led to a sharp increase in mortgage costs for millions of households, adding thousands of pounds to some bills, and
But now inflation has fallen back closer to 2% and interest rates are expected to follow.
The latest cut by the BoE follows its first since 2020 from 5.25% to 5% back in August.
As mortgage rates come down buyer demand is expected to pick up, pushing up house prices - hence the positive outlook for 2025.
That's good news for sellers looking to get the best price for their property, though they also face paying more for a new place they move to.
How to get the best deal on your mortgage
IF you're looking for a traditional type of mortgage, getting the best rates depends entirely on what's available at any given time.
There are several ways to land the best deal.
Usually the larger the deposit you have the lower the rate you can get.
If you're remortgaging and your loan-to-value ratio (LTV) has changed, you'll get access to better rates than before.
Your LTV will go down if your outstanding mortgage is lower and/or your home's value is higher.
A change to your credit score or a better salary could also help you access better rates.
And if you're nearing the end of a fixed deal soon it's worth looking for new deals now.
You can lock in current deals sometimes up to six months before your current deal ends.
Leaving a fixed deal early will usually come with an early exit fee, so you want to avoid this extra cost.
But depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal - but compare the costs first.
To find the best deal use a to see what's available.
You can also go to a mortgage broker who can compare a much larger range of deals for you.
Some will charge an extra fee but there are plenty who give advice for free and get paid only on commission from the lender.
You'll also need to factor in fees for the mortgage, though some have no fees at all.
You can add the fee - sometimes more than £1,000 - to the cost of the mortgage, but be aware that means you'll pay interest on it and so will cost more in the long term.
You can use a mortgage calculator to see how much you could borrow.
Remember you'll have to pass the lender's strict eligibility criteria too, which will include affordability checks and looking at your credit file.
You may also need to provide documents such as utility bills, proof of benefits, your last three month's payslips, passports and bank statements.
Lower mortgage rates can mean first-time buyers can better afford the monthly repayments.
But in tandem with rising house prices, affordability can still pose a challenge.
Alex Caddy, manager at Clarkes estate and eetting agency, said: “We have two camps of sellers at the moment – those without time pressure are holding fast with their asking prices, while others who reduce their price to attract a buyer more swiftly have more luck once they find a competitive price point.
“There are still many sellers planning their moves who are out looking despite not yet having a buyer themselves.
“There is certainly optimism that as first-time buyer activity picks up, this will create the much-needed knock-on effect to kick-start next year.”
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Who else tracks house prices?
Halifax is part of Lloyds Group, which is the UK's biggest mortgage lender.
Its monthly house price index is based on the mortgage data it holds and has been going since 1983.
It's one of several key barometers of the property market.
The official measure of house prices is from the Office for National Statistics, which uses data from the Land Registry where the actual sold price is recorded.
This is the most accurate of all the indices, but the figures come out three months after the homes are sold, so there's a big time lag.
Halifax and Nationwide each publish a monthly index tracking the average prices of homes on which they provide mortgages.
While they do adjust their figures to iron out big outliers, both lenders measure average house prices based on the properties they see.
As it's based on mortgage approvals, this doesn't include "cash buyers" who buy without needing a mortgage.
Rightmove and Zoopla also publish monthly house price data.
The former is based on asking prices from the property listings on its website.
Zoopla on the other hand uses sold prices, mortgage valuations and data on agreed sales.
Neither property website takes into account the price a property actually sold for like the ONS Land Registry, which could end up being higher or lower - and some might not even sell at all.
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Here's the latest data from other indices:
- Nationwide - house price growth slowed in October, with valuations rising 0.1% month on month, with the average UK house price in October standing at £265,738.
- ONS - average UK house prices increased by 2.8% to £293,000 in the 12 months to August 2024 - this annual growth rate is up from 1.8% in the 12 months to July 2024.
- Halifax - the average UK house price hit a new high in October, putting it just shy of £294,000, increasing by 0.2%.
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