The Intermediary – February 2025 - Flipbook - Page 16
RESIDENTIAL
Opinion
What can we expect
from the mortgage
market in 2025?
T
he latest analysis
released in January
by Yorkshire
Building Society – of
which Accord is the
intermediary-only
lending arm – suggested that firsttime buyers bounced back during
2024. Positive developments, such as
successive falls in the Bank Base Rate,
boosted their affordability potential.
Our predictions were based on the
latest available figures to the end of
October from UK Finance, which
pointed to 330,000 first-time buyer
mortgage transactions during 2024
– up by 13.8% from the decade low of
290,000 in 2023.
The 2023 slump was due to cost-ofliving pressures, higher interest rates
and burgeoning house prices, which
deterred would-be buyers. Some of
these factors have started to ease,
with inflation reducing towards its
target 2% and interest rates largely
stabilising, albeit with periodic
upticks triggered by market events.
Overall, house purchase activity
also increased by an estimated 10%
in 2024, and we expect to see 1.1
million transactions over the year,
compared to 2023’s one million. Firsttime buyers continued to drive the
majority of purchasing activity (54%),
similar to 2023.
The Stamp Duty changes announced
in the autumn Budget could trigger an
uptick in completions in Q1, as both
first-time buyers and home-movers
push to beat the deadline.
The reduction in the threshold
means anyone buying a £500,000
home would pay an extra £10,000,
and £25,000 if their property is
worth over £500,000. Previously,
properties costing up to £425,000 were
exempt. Although buyers in some
regions, like parts of the North, are
16
The Intermediary | February 2025
less likely to be affected, higher house
prices could see buyers in property
hotspots geing a higher moving
bill than expected. Then, there is
the added risk that the change could
put existing homeowners off selling,
potentially reducing the number of
properties available and inflating
prices for starter homes.
Other factors at play
All of this – coupled with geopolitical
uncertainty surrounding world events
– represent further risks for brokers to
keep a watchful eye on, to best advise
their clients.
While base rate cuts during
2024 are among the factors which
contributed to increased first-time
buyer confidence, and of course we’ve
just seen the first cut of 2025, I’d urge
caution regarding any hopes we might
see materially lower mortgage rates in
2025. The market was expecting three
base rate cuts this year, which had
been priced in already.
Volatility resulting from rising gilt
yields – and uncertainty surrounding
what these could mean for
Government borrowing and inflation
– sent mortgage rates upwards
from the start of January, although
there have been some more downward
movements in February.
We still believe the longer-term
trajectory for borrowing costs will
be gradually down, though we need
to be realistic about how far. The
historically low rates we saw postCredit Crunch are likely permanently
consigned to the history books.
Reasons to be cheerful
Nevertheless, the surge in first-time
buyer numbers is encouraging in light
of concerns that a perfect storm of
factors centred around affordability
and deposits might be preventing the
JEREMY DUNCOMBE
is managing director
of Accord Mortgages
next generation of homeowners from
realising their ambitions.
Yorkshire Building Society’s policy
paper – ‘Home Improvements –
building an integrated strategy for
UK housing’, called for enhanced
Government support and a united
industry approach to finding beer
solutions to help this vital group
achieve their ambitions.
Current developments represent
a golden opportunity for brokers to
deepen their client relationships by
reaching out proactively to explain
what all this could mean, and help
them make appropriate choices.
Overall, the positive first-time buyer
trend we reported in early January
may well play out through the rest of
this year, and certainly Intermediary
Mortgage Lenders Association (IMLA)
and the Association of Mortgage
Intermediaries (AMI) are forecasting
growth in the lending market overall.
However, we must collectively enable
all types of borrowers to move, and
build more houses so that there are
sufficient suitable homes.
While the economy continues to
show signs of volatility enroute to
what we expect to be a more stable
longer-term picture, people must
acknowledge that rates are currently
more reflective of realistic historical
trends and factor this into their
planning, basing their decisions on
their individual circumstances.
We’ve faced much bigger issues
in the past. Issues will continue to
arise which shake the markets a lile
or a lot, but experience tells us that
they are ultimately resilient and will
always bounce back. ●
