House price and mortgage rate predictions for 2025

Are mortgage rates likely to go down in 2025?

Up to now, mortgage rates have been on a downward trend. But in the last few weeks mortgage lenders have been increasing rates again after the biggest tax increases in three decades were announced in the Budget, as well as rising swap rates. The OBR has now predicted that inflation will rise to 2.5% in 2024 and 2.6% in 2025. Off the back of this, some are now predicting that mortgage rates will increase in 2025 or stay at current levels - the average 2-year fixed rate currently sits at 5.48%, and the average five-year fix at 5.21%, an increase from 5.39% and 5.06% at the start of November. This will make mortgage rates more expensive for first-time buyers and remortgagers, as higher interest rates make monthly mortgage repayments less affordable.

But there are still some big mortgage names announcing rate cuts of up to 0.20%. Plus, inflation is expected to gradually fall back to the Bank of England's 2% target despite rising in the short term. If this happens and the Bank is able to drop its base rate to 3.5% by 2030 as it predicts, then mortgage rates could also drop. If anything, as 2024 has shown, the mortgage market can be extremely volatile and change quickly.

What will mortgage rates be in 2026?

While 2026 is still some time away, and a lot can happen in that time, mortgage rates are expected to rise in 2025 in response to inflation also going up in the short-term, before coming back down by 2030. However, there are still some mortgage lenders announcing rate cuts and if inflation is lower than expected, this could cause mortgage rates to stay around the same level in 2025 and 2026 instead of climbing further. However, nothing is set in stone, and several key factors could influence mortgage rates in 2026 besides inflation, including how the economy performs, any shifts in housing policy which could impact borrowing costs, or unforeseen global or economic events that alter expectations and market conditions rapidly.

What mortgage rate can I get?

Looking at average rates can give you an idea of which way the mortgage market is going, but this doesn't give you a clear understanding of what mortgage rate you could get. While predicting precise numbers for mortgage rates in 2025 might be challenging, there is a way to ensure that you have the best rate for you locked in, regardless of what the market is doing.

At Tembo, we compare your eligibility to thousands of mortgage products from over 100 lenders when you create a free plan. At the end, you'll get a personalised mortgage recommendation will all the ways you could buy or remortgage, including indicative interest rates - which auto-updates every month to reflect what's going on in the market. If you lock in a rate with one of our award-winning mortgage brokers and rates change down the line, you can also take advantage of our free rate-checking service. If rates go down, simply get in touch with your Tembo advisor and they can reapply for you. If rates go up, you'll have already locked in a lower rate! Get started here.

If you're thinking of buying or selling a home in 2025, another key aspect to consider is what could happen with house prices.

Are house prices going down in 2025?

There is a backlog of first-time buyers and home movers who have been waiting to see what impact the 2024 general election and the Budget had on the housing market, but the lack of help for home buyers has meant there are many still holding off. But there are signs buyer demand is increasing, with the number of sales agreed is up 26%. However, house price growth has stayed muted, with recent figures showing average house prices falling by -1.4% as home sellers are pricing their properties more competitively in the hope of attracting buyers. This pent-up demand could cause house prices to rise in 2025 by 4% if mortgage rates drop to a level that makes it more affordable for buyers who have been holding fire until now.

However, this is not guaranteed. The upcoming changes to Stamp Duty will result in the tax bill on an average-priced home in England almost doubling from £2,768 to £5,268. Buyers could want the higher stamp duty costs reflected in purchase prices, which could place downward pressure on house prices in 2025. Plus, these changes could also result in more Buy to Let landlords and second-home buyers pulling out of purchases. Last year's budget, which allowed councils to double the council tax for second homes, has resulted in some areas seeing four times more homes come to market. More supply will help to keep prices in check, and if mortgage rates stay at current levels or rise further, this could also further slow down house price growth.

Is 2025 a good year to sell your house?

Whether 2025 is a good time to sell your house depends on a number of factors, including house price predictions, mortgage rates, and if the time is right for you. If mortgage rates stay high, putting downward pressure on house prices, this could mean home sellers have to be happy to sell their homes at a lower price than maybe they'd want to in order to attract buyers who are having to absorb higher mortgage costs. If mortgage rates fall, this will make it more affordable to get on or move up the ladder for many buyers, which could cause a surge in buyer demand. If this happens, this could cause house prices to surge.

Being aware of these market changes can help you competitively position your property to reach and appeal to the right buyers. But the most important thing to remember is timing the market can be very difficult, as there are no guarantees of what will happen. Instead, consider if 2025 is the right time for you to sell, and cater your asking price to accommodate what's going on in the market at that time.

What will happen to house prices in 2026?

What house prices could look like in 2026 will be influenced heavily by how the housing market performs in 2025. House price growth estimates for 2025 range from 1.1% to 4%, depending on economic factors like whether inflation rises to 2.6% as predicted or falls back down, and whether mortgage rates rise, stay at current levels or fall, as well as other factors. According to the OBR, house price growth is expected to average 2.5% from 2026 until 2030 but others have put estimates higher at 3.5%. As ever, it's difficult to know for certain as there are a multitude of factors which impact house prices.

Will house prices rise in the next 10 years?

It's impossible to know for certain what house prices will be, especially for far-off periods in the future like in 10 years’ time. However, it is expected that house prices will rise in the next decade, averaging 2.5% annually, and are predicted by 2029 to have increased 23.4%. However, house price growth varies significantly by location - more affordable regions like the North of England and Scotland tend to outperform the UK average, while in London and the South growth is a lot more muted.

At Tembo, we understand that buying or selling a home can be stressful and uncertain. That's why at Tembo we let you generate a free, personalised mortgage recommendation that compares your eligibility to thousands of mortgages and affordability-boosting schemes, so you can see the true picture of what options are available to you. From your first call, our award-winning team will be there every step of the way to provide support and guidance, ensuring that you make informed decisions for your future. Don't let uncertainty hold you back from achieving your dream home - start planning now with Tembo!