A changing market for buyers
As we move through 2025, the impact of mortgage rates continues to play a significant role in shaping buyer behaviour across the UK property market. With interest rates seeing gradual adjustments, buyers are more cautious yet remain motivated by the potential for more favourable borrowing conditions in the coming months.
The influence of recent mortgage rate changes
Following the Bank of England's decision to reduce the base interest rate from 4.5% to 4.25% in early 2025, the average five-year fixed mortgage rate has decreased from 4.83% in December 2024 to 4.61% by mid-2025.
While this rate reduction has slightly improved affordability for buyers, it’s still not enough to fully offset the higher mortgage costs seen in previous years. However, for many, these incremental reductions have triggered a renewed sense of optimism about entering the housing market.
Buyer sentiment: Cautious optimism
Despite ongoing concerns over living costs and inflation, many buyers are cautiously returning to the market, encouraged by the slight dip in mortgage rates. Rightmove’s data shows that new buyer demand in 2025 has increased by 5% compared to the same period last year. This increase in buyer activity indicates that prospective homeowners are willing to make the leap, especially those seeking stable mortgage payments and long-term property value.
However, a significant proportion of buyers remain ‘wait-and-see', keeping an eye on whether mortgage rates will continue to decrease before committing to a property purchase. The prevailing sentiment is one of cautious optimism, with many choosing to test the waters rather than rush into decisions.
The impact on first-time buyers
First-time buyers are a crucial group in today’s housing market. Despite facing higher borrowing costs than in previous years, first-time buyers are increasingly returning to the market. Rightmove reports that13% more first-time buyers have contacted agents this year compared to 2024, a sign that many are actively seeking their first home and are undeterred by initial affordability challenge.
With lower deposit requirements for some schemes, such as the Help to Buy and Shared Ownership initiatives, and mortgage rate cuts beginning to ease affordability slightly, first-time buyers are finding themselves in a better position to enter the market. However, these buyers are still scrutinising their options closely, often waiting for rates to lower further before making their final decisions.
Price expectations and regional variations
With mortgage rates still a key consideration for many buyers, expectations around house prices are being adjusted accordingly. In the southern parts of the UK, particularly in London and the South East, house price growth has slowed compared to more affordable regions in the North and Midlands. Buyers in these areas are less likely to stretch their budgets, given the ongoing pressure from mortgage rates and higher living costs.
Meanwhile, northern regions are seeing continued interest, with price growth outpacing southern areas. This is largely due to a combination of more affordable housing options and less impact from the mortgage rate hikes compared to the South, making these areas more attractive for first-time buyers and those looking to relocate for better value.
Looking ahead: What you need to know
The market is shifting, and it’s important to keep a close eye on both buyer sentiment and regional trends. While the market remains competitive, agents should be prepared for slower decision-making as buyers carefully assess affordability and interest rate predictions.
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