Is 2025 a good year to buy a house?
Is 2025 a good year to buy a house?
When it comes to buying a property, sweeping generalisations and national averages aren’t always a good thing. Instead, individual circumstances, local trends and personal financial health are crucially important.
That doesn’t mean wider, external factors shouldn’t be noted. On the contrary. Knowing the direction of the base rate, how average rents and house prices are behaving, and tuning into price forecasts can help you make informed decisions.
This blog is for anyone who has the burning question: is 2025 a good year to buy a house? As ever, bespoke financial advice should be at the heart of your next move but here’s the current sentiment in the sales and lettings market.
Renting has become more expensive
New analysis confirms we have reached the sweet spot for people considering buying their first property. Zoopla recently crunched the numbers using its vast bank of sales and lettings data to find paying a monthly mortgage is cheaper than paying a monthly rent for almost everyone in the UK. Only in the East of England were people better off renting.
If you want to know if this could be true for you, the portal outlined the figures it used to come to the conclusion. Zoopla says a typical first-time buyer will pay an average monthly mortgage repayment of £1,038. In contrast, it found the UK’s average monthly rent is £1,248 – 20% more than a mortgage payment.
It’s the granular detail that will tell you if 2025 is the year you could buy your first home. Becoming a homeowner may be cheaper than renting if you take out a 30-year mortgage with an interest rate of 4.5%. You’d also need to purchase a home worth £253,700 and put down a 20% deposit, which is equivalent to £50,740.
Ones to watch: influential price predictions
Is this situation likely to change over the course of 2025? Well, there are multiple factors at play. The baseline is whether rent rises outpace house price rises – both are on the ascendency. HomeLet’s latest Rental Index revealed the UK’s average rent for new tenancies increased 1% between February and March. Rent rises were more pronounced in some regions, increasing 2.2% in the South West and 1.6% in Greater London.
Another factor that affects affordability is your status. Renters agreeing new tenancies may feel the full effects of monthly price rises but they can weigh up whether it’s cheaper to rent or buy with more clarity. Existing tenants, who may have been able to renegotiate more favourable rents in return for loyalty and good behaviour, are at the mercy of rent rises and may have to speculate on whether it will be cheaper to rent or buy.
So, what about house prices? According to the Nationwide, the UK’s average house price increased by just 0.4% in February and remained unchanged during March. Savills expects UK house prices to rise by an average of 4% over the course of 2025. In contrast, Zoopla says UK rents are expected to increase by 3-4% during the remainder of this year.
Your local area matters
While price indexes and expert forecasting can act as a guide when deciding whether 2025 is the right time to buy a house, it’s what’s happening in your local market that matters. Every area will have its own sales and lettings microclimate, and it’s vital to consult estate agents to gauge what you can expect to pay when buying versus renting.
The Trump factor
Yes, the American president may have an impact on whether 2025 is the year you buy a home. The President’s trade tariffs sent shockwaves through the global economy and there were two byproducts that have had a direct impact on the UK’s mortgage market: decreasing two-year and five-year swap rates and a prediction that the Bank of England will make further base rate cuts in the coming months.
In fact, financial analysts did forecast the base rate would end 2025 at 4% but this has been revised down to 3.75% in the wake of Trump’s tariffs. As mortgage rates are, in part, priced on speculation, lenders have started to cut two- and five-year, fixed-rate mortgages, with more sub-4% deals emerging.
Rates move downwards
The suspicion that the Bank of England will cut the base rate in May – and that it may not stop there – has seen the likes of Nationwide, Halifax, Santander and Barclays flood the market with rates lower than 4% – even for those with smaller deposits.
There is also good news for those selling one home to purchase another, as well as first-time buyers. Cheaper mortgage rates are being extended to remortgages – something many movers need when they are buying a property that costs more than the one they are moving from.
Whether mortgage rates will drop much lower this year is the million dollar question. Sadly, even the best trend forecaster would not feel confident in saying yes or no but the general consensus is for mortgage rates to stay just above or below 4% this year.
Staying ahead of stamp duty
Of course, this is the UK housing market and it can’t be all sweetness and light. The 1st of April saw stamp duty rates change. As a reminder, first-time buyers now pay stamp duty on properties worth more than £300,000 – down from £425,000.
Existing homeowners have to account for the reintroduction of the 2% band, which is applicable to the portion of a property between £125,001 and £250,000. So if you already own a home and sell up to buy a new main residence worth £295,000, your stamp duty bill will be £4,750. Potential property buyers will need to revise their budgets accordingly and work out whether there’s enough time in 2025 to save any stamp duty shortfall.
Time to buy?
There is still a delicate balance between cheaper monthly repayments versus rent, deposit amounts, regional differences and new stamp duty costs. Is 2025 the right time to buy a house? If you can personally afford it, have taken financial advice and have a pressing need, it definitely is.
