The UK Housing Market in 2025: What to Expect

As we step into 2025, the UK housing market faces a new economic and political landscape. The past year has been marked by significant global and domestic changes, including a shift in government, ongoing geopolitical tensions, and an evolving financial environment.

For prospective buyers, homeowners, and investors, understanding how these factors will impact housing supply, affordability, and mortgage rates is critical. This guide explores the key trends shaping the property market in 2025.

The Economic Backdrop to the Housing Market

The economic factors driving the UK housing market remain complex. While inflation surged in previous years, leading to the cost-of-living crisis in 2023, the pace of price increases has since slowed. However, this does not mean that prices have fallen. Wages have grown in response to inflation, helping many households to afford higher mortgage costs, but the housing market remains challenging for first-time buyers.

Economic growth has remained sluggish, yet unemployment levels are still low. Inflation is expected to hover slightly above two percent throughout 2025, allowing the Bank of England to consider reducing the Base Rate from its previous highs.

Globally, economic uncertainty remains a factor. The impact of economic policies in the US, along with responses from the UK, EU, and China, will influence financial markets. Changes in global borrowing costs will have a knock-on effect on UK mortgage rates, making this an important area to monitor in the months ahead.

Mortgage Rates and Affordability in 2025

Despite expectations of further Base Rate cuts by the Bank of England, mortgage rates in 2025 are likely to remain between four and five percent. The historically low interest rates of around one percent, seen in previous years, are no longer sustainable given the current economic climate.

As market volatility stabilizes and wages continue to rise, a mortgage rate of approximately four percent is expected to become the new normal for homeowners.

Additionally, the second half of 2025 will see many homeowners reaching the end of fixed-term mortgage deals secured during the pandemic-era housing boom. A large number of borrowers who took advantage of historically low rates in 2020 will be looking to refinance, contributing to a remortgaging cycle that is expected to extend into 2026.

Challenges for First-Time Buyers

The first-time buyer demographic has changed significantly over the past few decades. The average age of a first-time buyer has risen from 29 to 34, reflecting the growing challenges young adults face in accessing the housing market.

One of the most significant changes in 2025 will be the end of the stamp duty holiday for first-time buyers in March. The threshold for the zero percent stamp duty rate will drop from £425,000 to £300,000, creating an expected rush of buyers trying to complete transactions before the deadline.

For many, raising a deposit remains one of the biggest barriers to homeownership. The Bank of Mum and Dad will continue to play a crucial role in helping young adults onto the property ladder, with family contributions averaging £25,000. However, this support is concentrated in higher-priced areas such as London and the Southeast, leaving many without parental assistance struggling to save.

The Reality of Housing Affordability for Young Adults

The affordability crisis for first-time buyers is not improving. In 2025, the number of young adults living with their parents is expected to continue rising, a trend that has already increased by 15 percent since 2011.

Only a small percentage of young adults—around eight percent of non-homeowners aged 25 to 34—have the savings needed for a 10 percent deposit on a first home in their region. Nearly half of non-homeowning young families have less than £1,000 in savings.

Since the 2008 financial crisis, house prices have consistently outpaced wage growth. The average property price in the UK has increased from £80,000 in 2000 to £290,000 today, while salaries have risen from £20,000 to £35,000. This gap makes it increasingly difficult for young adults to afford a home.

Mortgage payments now take up the highest share of household income in over 15 years, further limiting affordability. Two-thirds of 25 to 34-year-olds who cannot buy a home cite the cost of a deposit as their main barrier, while 41 percent report that they cannot afford the monthly mortgage repayments.

The Housing Supply Challenge in 2025

The fundamental issue of housing supply persists. The demand for new homes continues to exceed supply, and this imbalance is expected to remain a defining challenge throughout 2025.

The UK’s population has been growing steadily and is projected to reach 73 million by 2036, up from 63 million in 2011. Alongside this growth, demographic shifts are reshaping housing needs. The proportion of people over 70 is rising, increasing demand for downsizing options and retirement housing. Many older homeowners live in under-occupied properties, contributing to the shortage of available homes for younger generations.

The government has proposed reforms to the planning system to accelerate new housing developments, but the impact of these changes will take time to materialize. A lack of skilled construction workers further complicates the situation. Without a sufficient workforce, ambitious housing targets cannot be met, delaying much-needed supply increases.

The Buy-to-Let Market in 2025

The buy-to-let sector is facing ongoing regulatory changes and higher tax burdens. While the market remains stable compared to 2024, landlords are navigating increased complexities, leading some smaller investors to exit the sector.

This has implications for rental affordability, as a reduced supply of rental properties is likely to drive rents higher in areas where wages support increased rental costs. Investors who conduct thorough research into local rental markets may still find opportunities for strong returns, particularly in regions with positive earnings growth.

In Scotland, where private rental sector reforms have already been implemented, landlord numbers have declined by six percent, but the total number of rental properties has increased by three percent. This suggests that portfolio consolidation among landlords is helping to meet rental demand.

As regulatory changes take effect in England, landlords will need guidance to navigate the evolving landscape. Mortgage lenders and property professionals will play an important role in ensuring that landlords remain informed and that the rental sector continues to function effectively.

Sustainability and the Housing Market

New-build homes are leading the way in energy efficiency. With most newly built properties achieving high Energy Performance Certificate (EPC) ratings, homeowners are benefiting from lower energy costs. The introduction of the Future Homes Standard will further improve the sustainability of new housing developments.

However, retrofitting older homes remains a challenge. While widespread home improvements have yet to gain traction, there has been growing interest in solar panel installations and electric vehicle (EV) charging points. As more homeowners invest in EVs, the conversation around sustainable housing is expanding, creating new opportunities for energy-efficient home upgrades.

Will the Housing Market Crash in 2025?

There is significant online speculation about the potential for a housing market crash in 2025. At present, there is no clear indication that a crash is imminent. However, the stability of the market will depend on the broader economic environment.

While domestic factors remain relatively stable, global geopolitical risks still pose a potential threat. Economic uncertainty in major markets such as the US and China could have ripple effects on the UK.

Final Thoughts

The UK housing market in 2025 is shaped by shifting economic conditions, regulatory changes, and demographic trends. First-time buyers continue to face affordability challenges, while housing supply shortages remain a significant issue.

Mortgage rates are expected to stabilize at higher levels than seen in previous years, making homeownership a continued challenge for many. The buy-to-let sector is evolving in response to regulatory pressures, and sustainability concerns are gaining prominence in housing conversations.

While there is optimism that the market will remain stable, ongoing geopolitical risks mean that vigilance is required. Those looking to buy, invest, or remortgage in 2025 will need to stay informed and adapt to the changing financial landscape.