House price and mortgage rate predictions 2024

Will mortgage rates come down in 2025?

Mortgage interest rates are likely to keep going down in 2024. The average two-year fixed-rate deal has dropped to 5.40%, and the average five-year fixed-rate deal has also dropped from 5.49% in July to 5.07%. These recent drops have been caused by major mortgage lenders like Barclays, HSBC, Halifax and Nationwide cutting their own rates, off the back of the Bank of England cutting its base rate in August. Although rates aren't yet as low as they were at the start of 2024, they are on a downward trend. If inflation continues to come down, mortgage rates should decline over the coming months as lenders will be anticipating the base rate to be cut again.

However, although there are some sub-4% deals currently available, it’s likely we won’t see these as standard until the end of 2024 or even longer. So if you’ve been holding off buying your first home or remortgaging until rates reach this level, you might be waiting a while! Instead, consider getting on the ladder or switching deals earlier.

What mortgage rate can I get?

Although looking at average rates can give an indication of which way the market is going, this doesn't help you understand what rate you can get. Your LTV (Loan to Value) and eligibility significantly impact what mortgage rate you will be offered. So although the average two year fixed rate right now is 5.40%, buyers with a 10% deposit could access the best two-year rate available from our lender panel at 4.75%.

For prospective buyers, right now could be a good time to buy because there is less demand due to the higher rates. While this means your monthly repayments might be more expensive, or you might have to buy a less expensive property to accommodate the higher rates, it’s less likely you’ll be priced out by other buyers. Some buyers are even managing to bag a bargain, negotiating between 5-10% off purchase prices.

For homeowners looking to remortgage onto a new deal, it’s worth seeing what rate you could get now. If you’re 3-6 months away from your current deal ending, you can lock in a rate now, then if rates drop you can re-apply to benefit from a better deal. The upside of this is if rates go up, you will have already locked in a lower rate. Tembo customers who lock in a rate 6 months before their deal ends through us can ask to re-apply later down the line if rates change through our free rate-checking service. Get started today.

* Based on 90% LTV, with a 35-year mortgage term. Interest rates are accurate as of October 2024.

What are the predicted mortgage rates for 2025?

It's anticipated that the base rate will be cut to 4.75% in November 2025, with another cut in December before falling to reach 3.25% by next summer. This is because inflation should spend most of the next two years under the Bank of England's 2% target. These base rate reductions will encourage banks and building societies to cut their own mortgage rates, so we expect mortgage deals to be lower in 2025 than currently.

Will house prices drop in 2024?

Latest house price data shows that property prices have increased by 0.7% in the year to August 2024. House prices are likely to increase across all regions over the rest of 2024, but slowly, increasing overall by only 2% by the end of the year. This is because the higher mortgage rates have been dampening market activity. As rates start to fall, market activity has started to pick back up again at a faster rate than house price growth. There are also 16% more homes for sale than there were a year ago, keeping prices in check. Combined with the first base rate cut, this will lead to even more of a buyer’s market.

So if you’ve struggled to get on the ladder in 2023 due to higher rates, you might find it easier to do so this year. Remember to factor in a 5 -10% reduction when negotiating the purchase price. Just keep in mind that if you are only going to be in a property for a few years, the house value could initially fall. For home sellers, this could make moving to a new property harder, as you could have less money from the home sale to use to purchase your next home.

Energy efficiency will be top of minds

After the soaring energy prices of last winter and the increasing importance of sustainability, it wouldn’t be a surprise if energy efficiency became a bigger concern for home buyers. This will be especially true of landlords or those interested in buying a Buy to Let property. 

New regulations are due to come into effect in 2025 that will need all new tenancies to be for properties with EPC ratings of C or above. The average EPC rating in England and Wales is D, which means there will be a lot of properties which will need improving up in order to be let out to tenants.

However, it’s not just landlords who are concerned about energy efficiency. Almost nine out of 10 prospective buyers view the energy efficiency of a home as an important consideration. While almost half would choose good insulation over a bigger garden. For homeowners looking to sell their home in 2024, it might be worth making improvements to your home before listing the property to ensure it’s as efficient as possible.

This shift will bode well for newer properties, which are typically more energy efficient and sometimes come with additional features like solar panels and in-built electric car charging.

Speaking of new builds…

More new builds coming to the market

There was a drop in construction over 2023 as housebuilders responded to weaker market conditions and opted to finish existing developments rather than opening new sites. But construction should pick up in 2024, helped by anticipated funding for affordable housing projects. This will be helped by the new government's pledge to build one and a half million homes within the first 5 years of being in power.

The increase in new build properties being built will bolster the market by increasing supply. This is key, as one of the main causes of the unaffordability of housing in the UK is failure to build sufficient homes, in sufficient quantities. 

According to one report by the Centre for Cities, Britain has a backlog of 4.3 million homes that are missing from our housing market. To solve the issue, we would need to increase the size of the UK’s housing stock by 15%. Even if the government were to hit its target of building 1.5 million new homes, there is still a substantial housing backlog. So while an uptick in construction is desperately needed, it won't completely plug the gap.

Plus, new build developments will also create more shared ownership properties - shared ownership is when you purchase part of a property, then pay rent on the rest, purchasing more of the home over time until you have full ownership. Shared ownership can be more affordable than purchasing a home using a standard mortgage because you are only buying a share of a home. This makes it a great way to get on the ladder sooner, especially for those buying in more expensive areas. 

Renting is getting a shake up

The Renter’s Reform Bill is one of the most significant pieces of legislation for renters and landlords in the past 30 years. The new law is currently under review by Parliament and is likely to come into effect sometime in 2025.

The private rented sector is a vital part of the UK housing market. Almost 5 million properties in England are privately rented, making up 19% of all households. While some people stay in rented accommodation their entire lives, many see renting as a pitstop until they can buy a place of their own - 62% of private renters in the UK eventually plan to buy a home.

But on average, it takes almost 10 years to save up for a home. So while renting is a vital stopgap for those far off buying, there needs to be a sufficient supply of good-quality let properties. Whether you’re in a property for a couple of months or years, you should expect a property that’s well-maintained. Yet, nearly a quarter of privately rented properties don’t meet “basic decency standards”, while it’s estimated that 14% are actually unsafe. Shockingly, more than half of private renters in England struggle with damp, mould or excessive cold.

The new Renter’s Reform Bill aims to make renting fairer for both tenants and landlords by putting in place a number of changes. This includes tenants needing to give landlords two months' notice when they wish to vacate, allowing landlords more time to find another tenant. 

One of the main changes of the bill that has got a lot of airtime is the plan to abolish section 21. This is the process that allows landlords to repossess their properties by evicting a tenant. Right now, landlords don’t need to give a reason to give notice - this is why they are referred to as "no-fault evictions". Although the government announced in October 2023 that the abolition of section 21 would only happen when “sufficient progress has been made to improve the courts.", once in effect, this would mean landlords can only evict a tenant under reasonable circumstances.