Mortgage market activity set to grow in 2025

The outlook for the UK mortgage market in 2025 is positive as interest rate and cost pressures continue to ease.

An end-of-year report from UK Finance predicts that mortgage affordability will gradually improve over the next 12 months, building on the modest improvement seen in 2024.

Some buyers and sellers made an early start to their home moving plans for the year ahead, with property website Rightmove seeing record levels of activity on Boxing Day.

Sellers and home-hunters prepare for 2025 moves

It was the busiest ever Boxing Day for new seller activity on Rightmove, with a record number of new properties listed for sale by agents. The number of new properties coming to the market for sale was 26% higher than on the same day a year ago, when the previous record was set.

Typically, there is a 'bounce' in home-moving activity on Boxing Day as after the quiet of Christmas Day, people's thoughts turn to what a new year, and a new home, could look like. This leads into the busy January moving season.

Nearly half (46%) of homes listed by new sellers on 26 December 2024 were mid-market, second stepper homes -- consisting of three- and four-bed properties. Over a third (35%) of homes listed for sale were smaller properties, popular with first-time buyers, and 18% were the largest homes at the top of the ladder.

Potential buyers were also out in force, with Rightmove recording its busiest ever Boxing Day for visits to its platform, beating the previous record set in 2021.

And with a wider range of properties to choose from, total buyer demand -- measured by the number of enquiries sent to estate agents about homes for sale -- was 20% higher than a year earlier.

"While it's very early days, these first indicators are positive signs for a busy start to the year for agents," said Steve Pimblett, Rightmove's chief data officer.

Affordability constraints ease

The UK Finance report says that throughout 2024, lower inflation, rising real wages and gradual cuts in mortgage offer rates began to ease the affordability constraints that held back the market in 2023. As a result, there was a rise in lending for house purchases.

This came after a significant contraction in mortgage lending in 2023 as higher interest rates and cost-of-living pressures made it harder for borrowers to meet affordability criteria.

Residential house purchase lending in 2024 totalled £135bn, up 11% on the prior year, and in 2025 the banking and financial services group expects further gradual improvements in affordability to drive another 10% increase in purchase lending, to £148bn.

Continued steady growth

"The mortgage market showed greater than previously expected resilience in 2024 as cost and rate pressures began to recede," said James Tatch, head of Analytics at UK Finance.

"In 2025 we are forecasting continued steady growth in both house purchase and remortgage lending as affordability improves further."

Tatch added that any customer who finds themselves in financial difficulty should speak to their lender at an early stage, as a range of tailored support options are available to anyone who needs help.