UK property market predictions: will property prices rise in 2025?

Will mortgage interest rates come down in 2025?

All indicators point to mortgage interest rates falling further in 2025, but how far and how quickly remains uncertain. Industry experts suggest interest rates will eventually land at around 3.5%, and that is roughly where they’ll stay for some time. Previously, the financial markets suggested they would meet that level by mid-2025, but that now looks unrealistically ambitious.

The Bank of England has suggested there might be four base interest rate reductions throughout 2025, which would likely bring the interest rate down to 3.75%. There are, however, a few different factors that could potentially throw a spanner in the works – such as the growing global political uncertainty and predictions of further rises in inflation – so the suggestion of four reductions is very much just an indication at this stage.

It’s also important to consider that the Bank of England base rate doesn’t directly correlate to mortgage interest rates. Many mortgage interest rates will already have priced in the suggested four reductions, so we may actually see mortgage interest rates begin to climb again if those four reductions don’t materialise.

Will property prices go up in 2025?

The general consensus seems to be that property prices will rise in 2025, though predictions about how much they will rise are inconsistent. Some cautious commentators suggest we can expect increases of 1-2%, other more optimistic agents have predicted up to 5%. Looking at current trends and factors that might push prices in either direction, we expect prices nationally to grow by around 2%. It’s important to note, however, that the market is performing quite differently from region to region, and we expect this to continue into 2025. Property markets in the North of England have more room to grow than those in the South East.

What else might encourage property prices to go up in 2025?

There are several factors that will be encouraging property price growth in 2025. These include:

Demand before the stamp duty deadline

From 1^st April, stamp duty rates will return to pre-pandemic levels. Currently, no stamp duty is payable on the first £250,000 of a main residence. From 1^st April, that will reduce to the first £125,000. Those buying their first property are currently exempt from paying any stamp duty on the first £425,000, but at the start of April that will return to £300,000.

This means the cost of buying a house will rise substantially after the end-of-March deadline. This is likely to increase demand for sales that will complete before rates rise, which will temporarily put upward pressure on prices.

Lower mortgage interest rates

Although still higher than many people got used to pre-pandemic, mortgage interest rates have fallen. Back in October 2022, mortgage rates reached 6.16%, they’re now sub-5% on an average 5-year fixed mortgage. The lowest 5-year fix currently available is 4.1%.

Lower mortgage interest rates will encourage those who have been cautious about buying, and higher demand means higher prices.

Lower inflation

Although inflation has begun to creep up again, it is still much lower than it has been. Inflation was at 11.1% in 2022 but has since fallen to just over 2%. Lower inflation means better affordability. Living costs are still significantly higher than they have been, but with everyday prices rising less quickly, prospective buyers may consider now a good time to move.

Pent up demand

Turbulence in the property market means many people have been holding off moving, waiting for rates to come down. Any positive movements on the Bank of England base rate may be enough to tempt people back to the market.

Still not enough properties available

There still aren’t enough properties in the UK. The government has just committed to building 1.5 million properties over the next five years, but until that happens property prices are likely to continue to rise.

Shortage of rental properties

With a national shortage of rental properties being made worse by stamp duty changes, those currently saving for a property may adjust their expectations and make greater compromises in order to purchase their first home sooner. More demand from those who have previously rented would encourage robust property prices.

What might limit house price growth in 2025?

Whilst we’re likely to see a general trend of modest price growth in 2025, there are several factors that will be putting downward pressure on how much growth is achievable. These include:

Stamp duty changes

It’s difficult to predict what impact higher stamp duty rates will have. The deadline is likely to create increased demand in the first quarter of 2025, but we may well see a drop in sale volumes and downward pressure on pricing from 1^st April.

Autumn budget

There are concerns that the government’s autumn budget changes will see inflation rise again. This would be bad news for buyers. Higher inflation would not only impact affordability in terms of daily living costs, it would also make it very difficult for the Bank of England to justify lowering interest rates, which would mean mortgage interest rates would likely stay higher for longer. Lower affordability would inevitably put downward pressure on property prices.

Global political uncertainty

The Russia-Ukraine war and Gaza conflict are a growing concern. We’re now seeing growing unrest in Korea and Syria too. Any major global conflict has the potential to impact the UK’s economy. The Bank of England has also implied that they’ll be keeping a close eye on Donald Trump’s return to the White House in January.

Buy-to-let investors exiting the market

Stamp duty changes introduced in the Autumn Statement mean many buy-to-let investors are selling up. This is resulting in more properties coming to the market. One property portal has suggested that a third of properties on the market currently have no onward chain, which would suggest that a substantial number are former rental properties.

It’s already a buyer’s market, if lots of ex-rental properties continue to come onto the market and fewer investors are buying, property prices will be under pressure as sellers compete to secure a sale.

Regional property price predictions for 2025

Region	Price trend in 2024	Fall through rate 2024	% of properties on the market SSTC	Predicted price trend for 2025
East Midlands	+0.7%	21%	42%	+1.75%
East of England	-0.3%	22%	45%	+1%
Greater London	+0.6%	33%	45%	+1.5%
North East	+2%	29%	46%	+3%
North West	+2.3%	24%	48%	+3.25%
South East	-0.1%	18%	46%	+1.25%
South West	+/- 0%	25%	45%	+1.5%
West Midlands	+1.7%	29%	45%	+2%
Yorkshire	+2%	41%	44%	+2.25%

Property market predictions for the East Midlands in 2025

The East Midlands saw modest price growth of 0.7% during 2024. This suggests that there is potential space for further price rises, but with only 42% of properties listed with estate agents sold subject to status, demand is a little subdued. The region does have a relatively low sale fall-through rate at 21%, which suggests only serious movers are house hunting. Our prediction is that property prices will rise by 1.75% in 2025.

Property predictions for the East of England in 2025

The East of England was one of two regions to experience a drop in property prices in 2024. Prices in the area fell by 0.3%, but this shouldn’t come as a surprise with the region being home to some of the country’s most expensive properties. In a turbulent market, the top end will always feel the sharpest impact.

Despite the price correction, the market in the area is fairly robust. The fall-through rate remains fairly low at 22% – which is below national levels – and 45% of properties listed with agents are sold subject to status. Taking all this into account, we predict modest price rises of 1% in 2025.

London property price predictions for 2025

London experienced quite a strong market correction in the immediate aftermath of the pandemic, when other regions were performing strongly, so it makes sense that the region saw a slight increase in property prices in 2024. 45% of properties listed with estate agents are sold subject to status, so there is reasonably strong demand for property in the region, but a third of property sales are falling through before completion, which indicates some uncertainty.

We predict that property prices in London will rise by 1.5% in 2025.

Property price predictions for the North East in 2025

The North East saw price rises of 2% in 2024, which should be considered strong growth in current market conditions. Demand is high, with 46% of properties listed with estate agents being sold subject to status, but fall-throughs are fairly common with 29% of property sales being affected.

Our prediction for 2025 is that property prices in the North East will rise by a further 3%.

North West property price predictions for 2025

The North West is also performing strongly, with price rises of 2.3% in 2024. Demand in the region is exceptionally strong, with 48% of properties listed with estate agents being sold subject to status, and the fall-through rate is below average at 24%.

With strong price growth over the last year and continued strong demand, we are predicting further price growth of 3.25% in 2025.

What will happen to property prices in the South East in 2025?

The South East experienced a slight price correction in 2024, with property prices falling by 0.1%. Demand in the region remains strong though, with 46% of properties listed with estate agents being sold subject to contract and a low fall-through rate (18%).

Our prediction is that the South East will see a modest recovery, with property prices expected to rise by 1.25%.

Will property prices rise in the South West in 2025?

Property prices remained static in the South West throughout 2024. Demand is at a reasonable level, with 45% of properties listed with estate agents being under offer. 25% of property sales are falling through in the region, which is just below average. All in all, 2024 was quite an underwhelming year for the South West.

With this in mind, we predict fairly low price growth in 2025 of 1.5%.

Property market predictions for the West Midlands in 2025

Property in the West Midlands saw price rises of 1.7% in 2024. Demand is reasonably high, with 45% of properties listed with estate agents sold subject to contract, but the fall-through rate is also high at 29%.

Considering all this, we predict that property prices could rise by 2% in 2025.

Property market predictions for Yorkshire in 2025

Property prices in Yorkshire rose by 2% during 2024. Demand is reasonable, with 44% of properties listed with estate agents being sold subject to status, but fall-throughs are common at 41%.

Taking all this into account, we predict that property prices in Yorkshire could rise by 2.25% in 2025.

Moving into 2025, there is a great deal of uncertainty, both economically and politically. Whilst most indicators are pointing towards modest property price growth over the next 12 months, the market is very much at the mercy of wider economic conditions. Ultimately, we still have a shortage of available properties and a shortage of stock will always put upward pressure on pricing. Affordability will be key though, and that will be heavily determined by ongoing government policy and global stability.

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