Next year will be a buyer’s market even though the average new seller asking price is forecast to increase by 4% by the end of 2025, a property listing firm said.
In its forecast for next year’s housing market, Rightmove said although the direction of asking prices was its largest since 2021, this was in line with average long-term price growth.
The firm said there would be more transactions next year, totalling 1.15 million, as more homes became available to purchase. According to Rightmove, the average number of homes for sale at each estate agent branch is at its highest for this time of year in a decade.
It suggested that although there would be more buyers in the market, they would be “spoilt for choice”.
It said there would be strong competition for sellers as the number of homes for sale would remain high next year, which would suppress further price growth. However, this will benefit agreed sales.
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First-time buyers undeterred by stamp duty changes
Rightmove said there would still be an active first-time buyer market after the stamp duty deadline, which will see the threshold fall from 1 April.
While this will result in higher moving costs, the firm’s data showed some first-time buyers in expensive areas were going ahead with purchases to avoid or reduce the associated fees.
It said this would bring some transactions forward, but some homes in England would still have a “high availability” of homes that fall under the £300,000 threshold for first-time buyers.
Some 37% of homes across England will be stamp duty-free, with the highest share in the North East, at 73% of properties.
The number of prospective homeowners sending enquiries to agents is currently 13% higher than last year, Rightmove said, and with affordability improving alongside rents rising, this will motivate this buyer group.
Tim Bannister, property expert at Rightmove, said: “We expect a busier year in 2025, with around 1.15 million transactions completed. Stamp duty charges rising from 1 April means we are likely to see a particularly busy first three months of the year as first-time buyers, homemovers and investors all try to complete on planned purchases and avoid higher charges.
“The effects of stamp duty rising will be felt for the rest of the year too, and we may see some negotiation tactics play out, particularly on properties close to the £300,000 mark, as both buyers and sellers try to mitigate their higher costs through the price agreed.”
Lower mortgage rates expected
Rightmove said the average two- and five-year fixed mortgage rates would be around 4% by the end of 2025, based on current market trends.
This would be lower than the current averages of 5.08% and 4.83% respectively, which will help affordability and improve consumer confidence.
The firm said there would be room for rates to fall further in 2026, but there would not be a return to the historically low rates seen before the cost-of-living crisis.
However, predicting the path of mortgage rates will be difficult, as this would depend on “unpredictable factors” such as geopolitical tensions and inflation.
Rightmove said two-year fixed rate mortgages would become more popular as the price gap closes with five-year fixes, making fixing for longer “less attractive”.
A healthy remortgage market
Lenders will focus on remortgages next year as a large number of borrowers come to the end of their fixed rate deal.
It said people who fixed for five years in the “pandemic frenzy market of 2020” would be facing higher mortgage costs.
Since then, the average five-year fixed rate has risen from 2.55% to 4.89% now.
In contrast, borrowers who fixed after the mini Budget may see lower mortgage costs.
The average two-year fixed rate at this time would have been 5.48%, compared to 5.19% now.
Because of this, remortgaging and product transfers are “likely to be a big focus for lenders in 2025 as they look to attract homemovers with their product offerings”.
Matt Smith, mortgage expert at Rightmove, added: “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. 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.
“With remortgaging and product transfers set to be an important theme for lenders next year, we’ve launched a remortgage rate tracker to show the latest trends in this sector and monitor lender behaviour next year.”
