Should I buy a house in 2025?
Deciding whether to buy a property is a huge decision. The financial landscape, housing market conditions, mortgage rates, and even rental prices all influence whether purchasing a home will make sense for you. To help you weigh your options, we’ve outlined key factors to consider when deciding if you should buy a house in 2025.
Is 2025 a good year to buy a house in the UK?
Predicting the housing market is not an exact science, but there are clear trends worth keeping in mind if you want to buy a house in 2025. House prices are expected to go up in 2025, but by a conservative amount - estimates range from 2.5% to 4%. Plus, the incoming changes to Stamp Duty could cause more buyers to buy sooner to avoid paying a higher tax bill on their home purchases. If you're buying from April 2025, you may have to pay more Stamp Duty, so it's worth factoring in these costs. While mortgage rates are expected to stay at current levels or go down gradually, depending on factors like inflation, the Bank of England's base rate and swap rates.
All these factors will influence whether buying a home in 2025 is affordable for you - understanding your affordability is key to making an informed decision - you might find you can buy sooner than you think!
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At Tembo, we specialise in finding innovative ways to make home happen, whether that's helping first-time buyers make their first step onto the ladder, to second-steppers affording their forever home. Discover what options are available to you and how you could boost your budget without applying by creating a Tembo plan today - it’s free, and there’s no credit check involved.
Will house prices go down in the UK in 2025?
It’s uncertain what will happen to house prices in 2025. Because of the 2024 general election, the Budget and recent climbing mortgage rates many buyers have been holding off. But there are signs that the market is improving. Latest figures show that house price inflation has returned to growth - although low - helped by rising incomes and some recent mortgage rate cuts. Now, the number of house sales is expected to be higher over 2025 due to pent-up demand. Predictions range from house prices rising by 2.5% to 4% over 2025, depending on whether mortgage rates continue to come downward.
There’s also been a flurry of buyers trying to lock in sales before the return of higher stamp duty rates in April 2025, which will see the tax bill on an average-priced home almost doubling from £2,768 to £5,268. Once these changes are in place, buyers could want the higher stamp duty costs reflected in house prices, which could put downward pressure on prices. Plus, we could see more landlords and second-home owners selling up off the back of the 2% surcharge increase for second-home purchases. This could cause an influx of new supply, which could keep house price growth lower.
However, nothing is guaranteed, which is why timing the market is so difficult. The one thing to not bet on is any dramatic price drops, as this looks unlikely. Many homeowners are unlikely to reduce asking prices significantly, relying on long-term value stability. For buyers, this means 2025 may present opportunities to find more realistically priced homes, though doing your research and seeking local market insights will be crucial.
What will mortgage rates be in 2025?
Mortgage rates are a significant factor when calculating your potential costs in buying a home, so understanding what they could look like is key to decision-making. At the moment, predictions are that mortgage rates in 2025 could stay at current levels or fall slightly, depending on what happens to inflation and swap rates in the short term. The Bank of England’s governor recently said that there could be as many as four base rate cuts next year as inflation fades, which should give lenders more wiggle room to make cuts to their own rates. Plus, recently some big names have reduced their mortgage deals by up to 0.39%. But these reductions are only scratching the surface of the rate increases we saw after the Autumn Budget. Cuts to mortgage rates in 2025 are likely to be gradual, and it’ll be a while before we return to the lower rates seen in early 2024.
See what rate you could be offered in minutes
When you create a free Tembo plan, our smart tech compares your eligibility to thousands of mortgages from across the market to generate a personalised recommendation of all the ways you could get on the ladder. You’ll see your maximum buying budget and indicative interest rates for each of your options, all without having to apply for a mortgage.
Will rent go down in 2025?
Rent prices are unlikely to go down in 2025. Although recent rental growth has slowed - latest figures show the average rental price in England stands at £1,205, only 3% higher than a year ago. In contrast, back in August rents were 10% higher compared to August 2023. But in 2025 rent prices could increase more off the back of the Renters’ Right Bill becoming law, as landlords could raise rents to cover the costs of the additional regulation. Or they may sell their Buy to Let properties and leave the sector entirely, reducing the supply of properties available to rent. However, under the new law landlords will only be able to raise the rent once a year, and the bill should empower tenants to challenge an unfair rent increase.
Mortgage rates might feel higher at the moment, but it can be helpful to compare them to renting. Each mortgage payment not only reduces your mortgage loan but also builds up your property equity. While current mortgage rates may make the amount of interest you pay higher than you’d like, fixing your rate for 2-5 years provides certainty about your monthly payments. On the other hand, if you keep renting, your rent could increase by 5-10% annually - and all that money goes into your landlord’s pocket vs building up your own property wealth!
If you’re struggling to save a big enough deposit, there could be options out there to help you. If you’re a first-time buyer, you could save up to £4,000 each tax year into a Lifetime ISA and get a free 25% bonus up to £1,000 each year! Plus, if you choose a Cash Lifetime ISA you’ll earn interest on your savings. With a Tembo Cash Lifetime ISA, you’ll earn hundreds more in interest over 5-years vs saving with the closest competitor*.
When considering opening a LISA, remember that withdrawals for any purpose other than buying a first home or for retirement will incur a 25% government penalty, meaning you may get back less than you paid in.
If you want to get on the ladder sooner, there are also specialist buying schemes that could help. If you’ve paid rent for 12 months on time and in full, you may be able to borrow 100% of a property’s value with Skipton’s Track Record Mortgage. Or you could consider shared ownership, which allows you to buy a portion of a home and pay rent on the rest, making the amount you need saved up as a deposit and to borrow as a mortgage significantly less. You can also boost your deposit size through family help, for example, through a Deposit Boost a loved one can release money from their own property to give to you, which they will then pay back through a small mortgage.
You might like: How to buy a house with a small deposit?
Should I buy a house now or wait until 2026?
Deciding whether to buy a house now or wait until 2026 depends on your finances, living situation, and goals. However, there’s currently a good opportunity for buyers. Even if house prices rise in 2025, the increase is expected to be in the single digits. While demand could grow if more buyers come to the market, the influx in supply over the last few years (helped by former rental properties and second homes being listed for sale) should keep prices in check. On average, estate agents have on average 34 unsold properties in their books compared with 28 before the pandemic in 2019. This puts prospective home buyers in 2025 in a strong position to negotiate prices and take their time finding the right home.
Key considerations if you're buying in 2025
If you want to buy a home in 2025, here are a few tips to help you prepare and assess your readiness:
- Budget planning: Work out how much you can comfortably afford to buy—not just in terms of the property price, but also monthly mortgage payments and associated costs. Use our Mortgage Calculator to get an idea of what you could afford, or create a free, personalised Tembo plan to discover your true affordability.
- Improve your credit score. A good credit score can help improve your chances of being accepted for a mortgage because it shows lenders that you have a track record of paying things back on time. If you’re not sure of your credit score or think it could need improving, now is the time!
- Cut back on spending. When you apply for a mortgage, the lender will ask to see 3-6 months of bank statements to check whether you can afford a mortgage. So it’s a good idea to keep your spending in check in the months leading up to applying for a mortgage.
- Explore your mortgage options: There are thousands of mortgages out there, as well as budget-boosting schemes you might not have heard of. Speaking with a trusted mortgage broker who specialises in boosting affordability can help you find all the options available to you and guide you through the mortgage application process.
You might like: What to do 6 months before you buy a house
On average, we boost budgets by £82,000
Voted the UK’s Best Mortgage Broker three years running, we specialise in helping buyers make home happen, often against the odds. Discover what you could afford, including indicative interest rates and monthly repayments by creating a personalised Tembo plan.
*Based on saving £4,000 at the beginning of each year for 5-years. Calculations show at month 61 (after 5-years) Tembo customers saving at 4.75% would have £776.66 more than with the closest market competitor.