The housing market in 2025 has started in great shape. A combination of lower mortgage rates due to interest rates being cut in 2024, improved consumer confidence and a desire to get deals done before stamp duty land tax charges rise in April has seen a winter boom already happen.
In January, Rightmove said that a record number of early-bird sellers came to market since Boxing Day, giving buyers the highest level of choice at the start of the year in a decade. It also recorded its busiest start to a year for Mortgage in Principle applications, proof of buyer interest.
But the question is whether the momentum will continue and if there will be a spring bounce too?
That is a little harder to determine. The new SDLT thresholds come into effect from 1 April, not long after spring has begun to bloom. But buyers partway through the process are unlikely to halt their buying plans just because they didn’t complete their purchase in time.
Impact of interest rate cuts
What is more likely to impact whether there’s a spring bounce or not will be what happens with mortgage rates, and that depends on the progress of interest rate cuts. At Rightmove’s January House Price Index, its weekly mortgage tracker showed that the average five-year fixed mortgage rate was 4.75%.
February’s base rate cut to 4.5%, the first of up to four cuts expected by the Monetary Policy Committee this year, is an encouraging start to interest rates falling this year and subsequently impacting mortgage rates. Seven members voted for a 0.25 percentage points cut to 4.5% while the remaining two supported a more aggressive 0.5 percentage points cut.
How quickly the pace of cuts continues will influence lenders cutting mortgage rates and general consumer confidence to buy. The MPC has warned of a “gradual and careful approach”. It’s generally expected that mortgage rates should drop to 4% by the end of 2025.
A potential blip then back to normal
Many believe that the April SDLT deadline will result in an upturn of transactions just before the changes take effect as buyers rush through completions. They believe this will then be followed by a short hiatus in activity. However, it seems unlikely that demand will drop off a cliff at that point, especially if further base rate cuts have taken place.
How big an impact the reduced SDLT thresholds will have on buyers’ plans will also depend on where they are based. Rightmove data suggests that from the beginning of April, only 8% of London homes won’t incur stamp duty for first-time buyers, compared to 73% in the north-east. For these different areas therefore the SDLT impact will vary.
London buyers might rush through purchases and hesitate to buy after the thresholds reduce while those in other areas largely unaffected by the thresholds won’t be in the same rush. Similarly, prices may inflate slightly ahead of the threshold drop, meaning that resulting savings may not be as big as some buyers may hope.
For more information on how we can assist you on your sales journey, please contact one of our branches in Essex, London or Hertfordshire today. We also offer a free and instant online valuation to give you an idea of how much your home could be worth on the current market.
