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UK Property Market Review of 2025: Trends and Predictions for the New Year
As we move into 2026, the property market is looking positive if you’re a buyer. Lower mortgage rates and a wider range of mortgage deals are available, when compared to the last few years. And property prices seem to be softening, although this varies by region.
Let’s look back at what shaped the market in 2025, how the early months of 2026 are shaping up, and explore the potential that the rest of the year may hold. This is our 2025 UK property market review.
The UK Property Market in 2025: What Happened and Why?
2025 was not a dramatic year in UK property, but it was an important one. With the country finally moving to feel it has recovered from the pandemic and market shakeup following the September 2022 ‘mini-budget’, 2025 was a time of important correction for lenders, borrowers, and homeowners alike, setting the scene for a more stable future.
House Prices in 2025
Despite some monthly swings, the overall average property price in 2025 saw only a slight upward turn, with moderate annual growth. This modest increase showed a mainly flat market, but hid a deeper picture, with regional differences continuing to grow.
According to Nationwide, homeowners in the North of England, Wales, and Northern Ireland, growth was considerably stronger than the more static London market, while East Anglia showed a rare market decline.
The Impact of Affordability on Property Prices
Understanding the full picture of slower market growth during 2025 requires exploration outside the base mechanics of supply and demand. Throughout the year, demand remained strong, however, applicants were finding it harder to get larger mortgages, effectively capping price growth.
Affordability checks in the mortgage market, both for owner-occupiers and buy-to-let landlords, represented a sticking point while lenders remained cautious regarding stress test interest rates. Banks remained consistent, many continuing to hold on to higher stress rates despite a slowly improving outlook. Regulations are strict and rates in 2025 remained stable, putting pressure on stretched incomes that will continue until lenders’ risk appetite eases.
Flats vs. Houses
Investment in houses - detached, semi-detached, and terraced - remained stronger than that for flats. This may be due to multiple factors, including:
- Location: The greatest concentration of flats is in London where growth generally was lower, thus the poorer performance of flats may simply be seen as a reflection of their location.
- Desire for space: Recent, post-pandemic years have seen both families and individuals seek homes with a little more space, affecting the demand for flats.
- Maintenance and fees: Rising ground rents, service charges, and maintenance charges all contribute to weakening interest in flats.
- Negative coverage: Events over the last few years, including the Grenfell Tower disaster and horror stories of sudden maintenance bills have served to dissuade some buyers.
2025 Mortgage Rates
Mortgage rates fell gently across 2025, with average rates for a two-year fixed term 90% LTV mortgage at the beginning of the year around 4.8%, and ending the year at 4.0%. This followed the trend of the Bank of England Base Rate, which fell from 4.5% in February 2025, to 3.75% by December later in the year.
Mortgage Rates vs. Stress Rates
The drop in mortgage rates, however, did not immediately result in an improvement in mortgage affordability. Flexibility in FCA regulations allows lenders to set their own stress test rates, however lenders’ stress rates remained cautious. While some lenders chose to lower them in 2025, for many they remained high, reflecting the need for stability following the volatility of previous years.
Specialist Advice
The stable market of 2025, showing incremental interest rate adjustments alongside lender caution, illustrated the value of specialist advice.
Confident assessment and comparison of multiple lenders opened the door to mortgages for Clifton Private Finance clients, as we helped balance lender’s risk appetite to client profiles, securing more mortgages throughout 2025 than previous years.
Property Transactions Through 2025
Once seasonally adjusted, the HMRC figures for property transactions in the UK are stable and rising, showing residential transactions passing 100,000 for the first time since 2022.
More properties changing hands represents a market that is recovering in a measured fashion, allowing deals to complete and lower the number of renegotiations.
Buyers were finding the properties they want at acceptable prices, helping deals move more smoothly and efficiently.
The Autumn Budget 2025
Chancellor Reeves’ autumn budget was a pivotal moment that came after the market had been cautious for many weeks. Investors’ confidence dipped, fuelled by budget uncertainty in October and November.
Once the outcome was known and viable paths clarified, the market eased. Soon afterwards, mortgage lenders cut rates, the Bank of England Base Rate lowered in line with inflation, and the property market entered a new period of stability.
Less threatened with the looming concern of major tax increases, investors were able to make informed decisions using accurate data.
Property Market 2025 Impact and Looking Forward for 2026
While the outlook for 2026 is generally positive, different segments of the market have been impacted in separate ways.
First-Time Buyers
It has been the government’s intention to put more opportunities into the hands of first-time buyers, a long-term strategy that is already seeing some fruition. A combination of tactics, from pressure on second-home owners and casual landlords, to improved support and the softening of hard regulations for lenders have come together to provide a more enthusiastic environment for new homeowners.
One of the most important factors looking forward to 2026, of course, is the mortgage rate - and specifically the stress rate for lenders. First-time buyers have to look to two important assessment criteria: deposit, and affordability. A drop in mortgage rates in a confident environment will enable lenders to lower stress rates and make it far easier for those new to the market to maximise their buying potential - something we’re already seeing at Clifton Private Finance in the early days of 2026.
The LTV rates for mortgages have also seen improvements, with many 95% LTV mortgages on the market for first-time buyers, and even some 100% and family-assisted mortgages available - both impacting the deposit requirement on those looking to purchase property for the first time.
Lenders are adding additional support as longer mortgage terms become more normalised. 30-year and 35-year mortgages are more available, lowering the affordability pressure of monthly repayments and making that initial move a lot more palatable.
In conclusion, with 2025 proving a stable year for first-time buyers, the outlook for 2026 looks to improve the situation further, especially if interest rates continue to lower as many expect.
If you are coming to the market for a mortgage for the first time, Clifton Private Finance is here to help. Book a consultation with one of our advisers for independent market advice.
Owner Occupiers and Home Movers
Often the most squeezed when the market is stable-but-unremarkable, those looking to upscale in 2025 may have found stringent affordability testing an unwanted barrier. With lenders sensitive to over-valuation and cautious regarding stress rates, those looking to move to a larger home found less flexibility than may have been the situation when they first bought their homes.
At the same time, many home owners in 2025 may have had their existing fixed terms coming to an end, with many three-year and five-year terms that predate the September 2022 mini-budget and its shakeup of mortgage rates reaching their conclusion. Owner occupiers in this situation suffered a significant rate increase, with many moving from sub-2% mortgage rates to far more impactful 4-5% ones.
The more stable market of 2026 offers some hope. Rates have stabilised and lowered, opening the door to a range of new remortgage rates and opportunities. Those looking to move home or lock onto another reasonable fixed rate will find more breathing room in this coming year, lifting both the psychological and financial weight of 2025 for a brighter year. Now is an excellent time to get remortgaging advice and explore the options available to you.
Landlords and Investors
Many landlords have had a shaky 2025, with policy changes and tax pressure reframing the picture for investors across the country.
The government’s focus on owner-occupying rather than an over-reliance on landlords is doing slow but solid work, making small adjustments that are having an impact - especially for more casual landlords who may be managing only a single property. This has led to:
An increase in limited company and SPV wrapping for landlords
The tax implications for private landlords working from the simple sole trader structure are now more considerable than they once were. Even with only a single property, a limited company / director structure is often more beneficial and has become the new default where only a few years ago, it was considered necessary only for those looking to build a portfolio.
This has made many smaller landlords consider exiting the market, rather than pursuing property investment as the ‘easy’ cash cow it may once have seemed.
Renter-centric regulations
Increased regulations and support for renters has put additional administrative pressure on landlords and property management. Individually, safety inspections and maintenance do not have a great impact, but examined holistically, the environment has changed and a hands-off approach is no longer viable.
Profits are squeezed further at the lower end of the market, adding to pressures for less-focused landlords to gracefully exit.
Properties entering the market
As was already alluded to for first-time buyers, the combination of pressures has begun to impact the starter home and lower-value properties, releasing more to the market. For portfolio landlords with a confident administrative infrastructure in place, this may be seen as a beneficial situation as 2026 begins.
With more profitable buy-to-let mortgage rates on the horizon combined with a more accepting (if grudging) renter appetite for the growing rents in the market, investment opportunities and rental profits may well increase throughout the year for strategically financed landlords.
Mortgage Financing in 2026 with Clifton Private Finance
2026 promises to be bright for well-prepared house buyers, with lower rates and more options than have been seen for some time. At Clifton Private Finance, we work with the whole UK market of lenders, exploring and comparing mortgage products to determine the right fit to suit each of our clients. With years of experience and understanding, we consider your circumstances to find a solution that properly meets your needs.
Contact our mortgage team at Clifton Private Finance for a free consultation and explore the mortgage options available to you today.
