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Published: 16 December 2024

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UK Finance has published its housing and mortgage market forecasts for 2025 and 2026 together with projections for 2024 full year numbers.

With rate and cost pressures continuing to ease, the outlook for 2025 is for a gradual improvement in mortgage affordability, feeding into market growth. As interest rates tick down, we expect arrears to continue to fall, with tailored forbearance helping those who need it.

Forecast 2025

Year on year change compared to 2024

Gross Lending – £260 billion +11 per cent

Lending for house purchase – £148 billion +10 per cent

External remortgaging – £76 billion + 30 per cent

New buy to let purchase lending – £9 billion, down 7 per cent

Internal product transfer – £254 billion +13 per cent

Arrears – 99,000, down 5 per cent

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Key figures for 2024

Throughout 2024, lower inflation, rising real wages and gradual cuts in mortgage offer rates began to ease the affordability constraints which held back the market in 2023. This led to modest annual growth in lending for house purchases, although refinancing markets remained subdued. Arrears levels have been helped by prudent lending standards, extensive lender forbearance and low unemployment. The number of customers falling behind on their mortgages looks to have peaked early in 2024 before falling back. While the number of properties taken into possession has risen, this is largely due to historic arrears cases now working through the court system and the numbers are very low compared to historic norms. 

Year on year change compared to 2023

Gross Lending – £235 billion +4 per cent

Lending for house purchase – £135 billion +11 per cent

External remortgaging – £59 billion, down 10 per cent

New buy to let purchase lending – £10 billion +13 per cent

Internal product transfer – £224 billion, down 7 per cent

Arrears – 104,200, down 3 per cent

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James Tatch, Head of Analytics at UK Finance, says: “The mortgage market showed greater than previously expected resilience in 2024 as cost and rate pressures began to recede. Affordability constraints did impact external remortgage activity, but strong competition to retain customers meant those coming off fixed rates could find a new internal product transfer deal without needing a new affordability test.

“In 2025 we are forecasting continued steady growth in both house purchase and remortgage lending as affordability improves further. We are however forecasting a slight fall in buy-to-let lending in 2025.

“The prudent underwriting standards in place for the past decade have helped most customers who might have fallen into difficultly. Arrears look to have peaked early in 2024 before falling back, and we expect them to fall again in 2025.

“Any customer who finds themselves in financial difficulty should speak to their lender at an early stage, as the industry continues to provide a range of tailored support options to anyone who needs help.”

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Market overview: a gradual recovery after a tough year

In 2023 higher interest rates and cost-of-living pressures constrained affordability and drove a significant contraction in mortgage lending. This continued into the early months of 2024 but, from early summer, we saw the effect of real wage growth and falling mortgage offer rates translate into an increase in lending for house purchase.

Residential house purchase lending in 2024 totalled £135 billion, an increase of eleven per cent compared with 2023. Although the number of purchase loans in the year grew by four per cent, activity was still well below the average levels seen in the decade before 2023. In 2025, we expect further gradual improvements in affordability to drive another ten per cent increase in purchase lending, to £148 billion.

Remortgaging activity was relatively subdued in 2024. This was, in part, due to slightly lower numbers of customers with fixed rate mortgages reaching the end of their deal periods and looking to refinance. However, despite some cuts in offer rates and rising real wages, affordability constraints limited the options for customers looking to refinance on the open market. Remortgaging fell by ten per cent to £59 billion in 2024, whilst internal Product Transfer (PT) transactions, which are not subject to affordability tests, fell by a more modest seven per cent to £224 billion. Next year, with more fixed rate deals coming to an end, we forecast growth in refinancing. As affordability continues to ease gradually, remortgaging is expected to grow by 30 per cent to £76 billion, with PT business seeing lower growth of 13 per cent to reach £254 billion.

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Published: 05 December 2024

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The latest Property Market Index Review by London agency Benham and Reeves has revealed that house prices climbed by 0.9% in Q3 of this year.

The agency compiles a quarterly accumulation of house price data from the top four existing indices, from Halifax and Nationwide, Rightmove and sold prices from the UK House Price Index.

Current property values

Based on a geometric mean of all four existing data sets, the index from Benham and Reeves shows the average UK house price sat at £311,154 during Q3 2024.

This marked a 0.9% quarterly increase, the third consecutive quarter of positive growth seen so far this year. On an annual basis, the average UK house price also sat 2.2% higher when compared to Q3 2023.

In London, the current average house price in Q3 2023 was £574,254 during the third quarter of this year.

Whilst this remained flat versus Q2, it did mark a 1.1% increase on an annual basis.

Market Gap Between Mortgage Approval Price (Buyers) & Asking Price (Sellers)

In Q3 2024, the market gap between the average mortgage approved price of a buyer (£278,890) and the asking price expectation of a seller (£370,672) sat at 32.9%.

This market gap had narrowed from 35.5% the previous quarter, suggesting that sellers have been more willing to lower their asking price expectations in order to secure a buyer.

In London, the gap between buyer (£524,685) and seller (£684,210) was 30.4% which also marks a quarterly narrowing, again suggesting that London sellers are more willing to meet in the middle in order to secure a buyer.

Market Gap Between Asking Price (Sellers) & Sold Price (Buyers)

The latest index by Benham and Reeves shows that the gap between the average UK asking price and the average sold price has continued to close.

Across the UK, the average sold price in Q3, 2024 stood at £291,411, -21.4% below the average asking price of £370,672. This market gap had closed from 24.1% the previous quarter and remains slimmer when compared to the 23.5% seen during Q1.

In London, the gap between asking price and sold price sits at -22.9%, having also closed from -25.7% in Q2 and, again, remaining slimmer than the -25% seen during Q1. In fact, it’s the smallest gap between asking and sold price seen since Q1 2023.

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Director of Benham and Reeves, Marc von Grundherr, comments: “2024 has been a far more positive year for the property market and this is becoming abundantly clear when analysing house price trends across each segment of the market.

“We’ve seen consistently positive growth with respect to overall house prices across all three quarters of this year so far and this is despite the fact that buyers are still having to contend with significantly higher interest rates than they’ve become accustomed to in recent years.

“What is clear is that sellers are taking a more pragmatic approach to selling, with the gap between the mortgage approved price of buyers and the asking price expectation of sellers narrowing. As a result, we haven’t seen the previous stalemate across the market whereby sellers refuse to budge on price, whilst buyers simply can’t afford to match them. The result of both parties meeting in the middle has been an uptick in sales, a higher proportion of asking price achieved and a more measured, healthy rate of house price growth seen across the market.”

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Published: 28 November 2024

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New research has revealed the best type of housing in London for property investors, as rental demand in the capital remains strong and interest rates are set to fall in 2025.

Drawing on the latest house price and private rental data from August 2024, specialists at SBA Property Management have identified terraced houses as the highest-yielding type of housing for buy-to-let returns in the capital city.

With average property prices of £579,743 and monthly rental costs of £2,594, terraced houses in London offer buy-to-let investors yields of 5.37% – well above the average for all property types at 4.81%.

The second most lucrative property type to invest in is flats which offer an above-average rental yield of 5.08%. The average price of a flat in London is £443,073, with monthly rent payments of £1,876.

Semi-detached houses also present a good opportunity for investors, with average house prices of £686,952 and monthly rents of £2,695, yielding returns of 4.71%.

Detached houses offer the lowest rental yield for buy-to-let investors of 3.11%, with average house prices surpassing the million mark at £1,036,179.

Property investors remain in a strong position to buy, as the stage is set for mortgage costs to fall over the next year as interest rates decrease. In fact, interest rates are expected to fall as low as 2.75% by autumn 2025, according to economists at Goldman Sachs, making buying more affordable.

Paired with the predicted growth of the rental market as demand in the capital continues to skyrocket, now is a good time to make a purchase. 

Experts predict a moderate annual increase in London rental prices between 3% and 5% in 2025, above the UK-wide market average which is 2% to 4%.

Tim Darwall-Smith, director at SBA Property Management, saus: “As mortgage costs fall and demand for rented accommodation continues to increase, now is the perfect time for investors to look at the London property market.

“Our analysis of the latest data shows that terraced housing is the best investment opportunity in London, yielding high rental return rates of 5.37%. Investors must pay attention to which property types and locations will make them the best returns – as interest rates continue to decrease, new opportunities will present themselves.”

Going beyond the latest data, terraced houses and flats have proven to be the most reliable investment opportunity over the last five years, with their average rental yields from the period August 2019-July 2024 sitting at 4.88% and 4.47% respectively. This is closely followed by semi-detached properties, which yield an average return of 4.32% – just above the five-year average for all properties at 4.3%.

When comparing London with the rest of the country, rental yields are unsurprisingly lower in London due to high property prices, but the pattern of how well different property types perform in terms of rental yield remains the same. 

Across England, terraced housing was the highest-yielding property type at 5.80%, closely followed by flats at 5.58%.

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Published: 22 November 2024

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Long-awaited reforms to the leasehold system in England and Wales have been delayed for several months owing to “flaws” in legislation passed by the previous Conservative government, the housing minister has said.

Matthew Pennycook told the Commons yesterday it would take longer than expected to introduce reforms originally passed by the former housing secretary Michael Gove in the dying days of the last parliament.

Pennycock told the press that he remained committed to ending what he called the “feudal” leasehold system, which means homeowners have little say over the charges they pay or the way their buildings are managed. He promised to abolish the system before the next election.

Pennycook said: “We are determined to act as quickly as possible to protect leaseholders suffering from unfair practices, but we’re equally determined to take the time necessary to ensure our reforms are watertight and to the lasting benefit of leaseholders.

“We committed in our manifesto to finally bringing the feudal leasehold system to an end and that is precisely what the government is determined to do over the course of this parliament.”

Gove had long promised to end the system altogether, but ended up passing a more limited package of reforms, which included a ban on selling new houses under leasehold and making it easier for tenants to manage their own buildings.

Many of the measures in the Leasehold and Freehold Reform Act 2024 needed secondary legislation to be enacted, which Labour promised to pass quickly, but which Pennycook said had proved more difficult than expected.

The delayed measures include calculating how much tenants should pay to purchase their leases, which officials say was undermined by a loophole in the original law that would have left the government open to legal action.

Another problem is that many building managers do not themselves own the freehold and so would be unable to comply with the original act.

A third flaw in the previous bill, Pennycook said, lay in provisions to enable more tenants to vote for the right to manage their own properties. The way the bill was written, he said, would have led some building owners themselves to vote in any ballot, potentially cancelling out the votes of the inhabitants themselves.

“The very fact that crucial measures, including the new process for determining premiums, cannot be brought into force until we’ve legislated to fix a number of serious flaws in the last government’s act should serve as a warning about the risks of rushing these vital reforms,” he said.

The delay to the Gove reforms was welcomed by freeholders.

Natalie Chambers, the director of the Residential Freehold Association, said: “We welcome the government’s recognition of the complexities around implementing leasehold reform, as well as the serious flaws in the legislative approach taken by the previous government.”

Some leaseholders also welcomed the clarity provided by Pennycook’s announcement. Sebastian O’Kelly, director of the Leasehold Knowledge Partnership, commented: “Pennycook is a cautious, detail-driven minister, but five million people are now living in homes with a flawed tenure the government wants to ban.”

Others, quite understandably, expressed frustration at yet another delay.

Harry Scoffin, the founder of the campaign group Free Leaseholders, added: “This isn’t the insurgent government-of-delivery we were promised. Instead, we face burial under yet more consultations. Leaseholders will remain financial captives for years to come. Deep-pocketed vested interests benefit from these delays.”

Propertymark has highlighted the following future consultations.

Each consultation targets specific areas of concern and requires secondary legislation to ensure greater transparency and fairness.

+ January 2025 will see the commencement of the removal of the two-year restriction on enfranchisement and lease extension claims from the point of property purchase so that leaseholders will no longer have to wait.

+ In Spring 2025, the UK government commence the provisions on the Right to Manage which increase access to the right for leaseholders in mixed-use buildings, alongside reforming costs and voting rights.

+ No date has been set for the consultations on the details of the Act’s ban on building insurance remuneration.

+ Summer 2025 will see the consultation on the valuation rates used to calculate the cost of enfranchisement premiums.

+ 2025 is the only timeframe stated for a consultation on implementing the Leasehold and Freehold Reform Act’s new consumer protection provisions for homeowners on freehold estates, and on service charges and legal costs. However, these measures will be brought into force as quickly as possible after the consultation process, which is one thing the UK Government has, committed to.

+ Options to reduce the prevalence of private estate management arrangements to end the injustice of ‘fleecehold’ will also see a consultation released in 2025 with no specific date set.