As we settle into 2025, it's a good time to reflect on the past month and look ahead at what the mortgage market might hold. January is traditionally a quieter month for housing activity, and this year has been no exception, although we have seen some interesting trends emerge.

Market Overview:

The general sentiment in the market is one of cautious optimism. While the economic outlook remains uncertain, we've seen some positive signs, particularly regarding inflation. This has led to a slight easing of mortgage rates compared to the peaks of late 2024, although they still remain significantly higher than the historic lows we saw a few years ago.

Buyer Activity:

January typically sees a dip in buyer activity as people focus on the festive season. This year, we've observed a similar pattern, with a noticeable decrease in new enquiries compared to the final quarter of 2024. However, the buyers that are active seem to be more serious and committed. We are seeing fewer speculative offers and more realistic pricing from sellers, leading to a more balanced market in some areas.

• First-time buyers: This segment remains a key driver of the market. Affordability continues to be a major hurdle, but the slight dip in rates and more realistic asking prices is offering a glimmer of hope. Government schemes, such as shared ownership and Help to Buy (where still available), are still proving popular.
• Home movers: Many homeowners are taking a "wait and see" approach, carefully monitoring the economic climate before making a move. Those who are selling are often doing so out of necessity (e.g., downsizing, relocation) rather than driven by aspirations for a larger property.
• Investors: The buy-to-let market is facing some challenges due to higher interest rates and increased regulatory scrutiny. This has led to a slight cooling in investor activity, with some landlords considering selling their portfolios.

Mortgage Trends:

• Fixed-rate mortgages: These remain the most popular choice for borrowers seeking stability and certainty in their monthly payments. While 2-year and 5-year fixed rates are still prevalent, we are seeing increasing interest in longer-term fixes (10 years or more) as borrowers seek to protect themselves against future rate fluctuations.
• Tracker mortgages: With the Bank of England base rate potentially nearing its peak, some borrowers are considering tracker mortgages, hoping to benefit from any future rate cuts. However, this option carries more risk and is generally recommended for those with a higher risk tolerance.
• Affordability: Affordability remains a significant concern for many borrowers. Lenders are carefully assessing affordability criteria, taking into account rising living costs and potential future interest rate changes. It's crucial for prospective buyers to have a clear understanding of their budget and seek professional mortgage advice.

Looking Ahead:

While it's difficult to predict the future with absolute certainty, the general consensus is that the market will remain relatively stable in the coming months. We anticipate a gradual increase in activity as we move into the spring, traditionally a busier period for the housing market. The key factors that will influence the market include:

• Inflation: Continued progress in bringing inflation under control will be crucial for boosting consumer confidence and supporting mortgage affordability.
• Interest rates: The direction of the Bank of England base rate will have a significant impact on mortgage rates and buyer activity.
• Economic growth: A stronger economic outlook will likely lead to increased buyer confidence and a more buoyant housing market.

Our Advice:

If you're considering buying or remortgaging in 2025, it's essential to seek professional mortgage advice. We can help you navigate the current market, assess your affordability, and find the best mortgage deal to suit your individual circumstances. Don't hesitate to get in touch for a free consultation.

Disclaimer: This article is for general information purposes only and does not constitute financial advice. Please consult with a qualified mortgage advisor for personalised advice.