As we nicely enter the second half of 2025, we thought it would be a great time to review what we have seen in the property and mortgage market so far this year. We set out our predictions for the housing market in 2025 back in January, so we are going to compare the results so far against those predictions but also stalk about what trends we have seen so far over the last 6 months.
This blog isn't to show whether we were right or wrong in January but purely to show you guys what we are seeing in the housing market in the UK in 2025 so far as mortgage advisers working in this sector daily.
Let’s start with what we have actually seen in quarter 1 and quarter 2 of 2025 in the UK housing market from our experience as independent mortgage advisers…
Since the Autumn budget of 2024 which introduced increase in capital gains tax on the disposal of assets and the implementation of inheritance tax on pensions from 2027 onward. Inheritance tax on gifts remained the same with no tax due on any gift given 7 years or more ago in the past. These 2 main tax changes we have seen, has caused a shift in the strategic planning of a number of people and what they do with their assets.
Over the years we have seen an increase in the number of 1st time buyers relying on help from the ‘Bank of Mum & Dad’, where Mum & Dad gift their child some money to be used towards their deposit for their 1st home. With the introduction of tax on pensions, more parents are opting to gift their kid’s money now to be used as a deposit on their first home, rather than shelter that money in what once was a tax-sheltered structure – their pension. Instead, they would rather see their children benefit from this gift now, when they are younger, healthier and more likely to outlive the 7-year limit of inheritance tax.
This has been more prevalent with Grand parents as they have amassed more wealth over their lifetime and have less time to offload this wealth before they are hit with inheritance tax, so we are now seeing more and more grandparents offering support with their grandchildren’s deposit than we have in recent years.
Another shift in the market is the increase in landlords offloading some of the properties in their portfolio to their tenants to help reduce their tax liability and exit the investment market that was once more profitable and stress-free as it is today. Over the years following budget after budget private landlords have taken a real battering. From rising interest rates, increased compliance and regulations to additional taxation on their profit and assets it has become less attractive to be a landlord (especially a portfolio landlord).
These portfolio landlords who have amassed a large portfolio and therefore a large and complex tax problem, are now looking to strategically sell off their properties one by one to cash in and reduce their tax. As a result, landlords are now looking to sell their properties to their current tenants at a discount to allow for a faster and pain-free sale.
By selling their property to their tenant at a discount they reduce the purchase price, which reduces their capital gains tax liability. In doing so they are supporting their tenant with a deposit that they may not have been able to obtain otherwise as the discount on the purchase price can act as the deposit for the tenant. The landlord also saves various costs such as void periods, estate agents fees and potential maintenance if they sell to their tenant as they do not have to evict them to sell the property vacant and do not need to ‘freshen’ the property up to get it on the open market.
*This is something we predicted in January so were feeling pretty smug about this one! Check here if you don’t believe us… 2025 Property Market Predictions | Green & Green Mortgages Hull
The increase on stamp duty for additional properties has also presented a change in buyer attitude in the buy to let sector. Historically stamp duty for additional properties (2nd homes, Buy to lets and holiday homes) was 3% of the purchase price paid on completion. As of Autumn 2024, this has jumped to 5% which has left investors reconsidering their strategy.
Many ‘would be’ or what we would call ‘Amateur’ investors, those who are thinking about investing or those who only want to buy one or two properties or those who became landlords by accident have been discouraged from investing due to the significant cost of investing in property.
With those 1st time or smaller investors sitting on the side lines, this has created a great opportunity for those portfolio and professional landlords as they now have the opportunity to buy available properties that they would have previously had to compete against many other potential investors to secure. Less competition means more stock to choose from, with less need to overbid to acquire the property and more vendors being motivated to sell to you with less options.
Two strategies we have seen an Increase in of late is investing opting to Air BnB their properties and invest through rent-to-rent schemes. With interest rates still higher for those that secured rates during covid, the returns on standard let properties (On assured short hold tenancies of 6 months) have been squashed and cash flow squeezed. This has led to investor now exploring letting their property on short basis’s through platforms like Air cash flow to maximise cash flow. Investors can now let their property for £100 per night as opposed to £600 per month.
The rent-to-rent strategy is one that doesn’t involve owning the property, therefor avoiding the stamp duty liability as you don’t initially buy the property. Instead you take over a standard let property from a landlord who has typically had enough of being a landlord and wants to get out of the game but would still like the income. Instead of letting the property on a standard basis, you pay the landlord their standard rate of rent e.g. £600 per month and you let the property on a HMO or short term let basis which could cash flow say £2000 per month. You are left with £1400 cash flow from a property you manage but not one that you own and had to pay expensive fees to acquire.
Other than the mindset shifts of buyers and sellers, what else have we seen in the UK housing market since the start of the year?
The average property price in the UK has risen by 2.9% showing a steady increase in value, mainly fuelled by 1st time buyers with the support of family.
Interest rates have fallen significantly with the Bank of England base rate dropping by 0.5% in 2 equal drops from 4.75% in January to 4.25% today at the time of writing this. In January this year we predicted that the base rate would fall to 3.75% by Christmas, with those 2x .25% drops so far this year we are halfway to that target at the halfway point of the year.
As the UK housing market heats up with more people looking to buy this year than in 2024, many lenders are now relaxing their criteria to steal their share of the pie. Many high street lenders such as Nationwide (the largest lender in the country) are relaxing their criteria on new build properties, when typically, they would only lend up to 90% on new build houses they have now increased this to 95%. Nationwide and many other lenders are now increasing how much they will lend to 1st time buyers from 4.5x annual earnings to 5.5-6x annual earnings to help them buy more properties.
The positive in all of this is that the UK housing market is moving as predicted which gives us comfort to be able to predict what the 2nd half of 2025 is going to throw at us.
We will be back in December to re review the market to see how our predictions measured up and what else has changed in the next 6 months.
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