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As we enter 2025, the landscape of mortgages in the UK is most likely to continue to be characterised by shifts influenced by political, economic, regulatory, and technological changes.
Robert Sinclair
Chief Executive Association of Mortgage Intermediaries
The UK housing market remains a cornerstone of the economy, and mortgages are a critical component enabling property ownership of a variety of different tenures. It remains surprising that such a crucial bedrock is left to a series of unconnected influencers to manage.
Political
The arrival of a Labour government has seen a new legislative agenda bristling with promise of changes in planning, clear housing targets and funding support. We are now seeing the Ministry of Housing, Communities and Local Government jump to the centre stage as they colour in the plans they have for our future.
I want to see the establishment of at least one‘ New Town’ on the HS2 railway line; significant revisions to planning laws and the green belt with the slaughter of NIMBY’ s; pressure on developers to build more social housing and affordable homes; and local authorities being encouraged to get back into the building game. We will also see more rent reform that is bound to influence investment decisions in the private rented sector. Whilst a ban on no fault evictions seems inevitable, a rent growth cap of say 3 % might be better than a total freeze on rents and unfettered protection for tenants.
Much of the investment will come through the Metro Mayors. The successes of the Burnham joint ventures with the private sector in Manchester will undoubtedly be a blueprint to be followed in other areas. Whilst this will kick-start volume, it will require a vast move away from the current market driven by the volume speculative house builders who currently dominate the residential construction sector. However, to meet the targets, bringing back these older concepts must be incremental, not as substitution for standard residential construction.
The implications for materials supply chains are considerable, as are questions over whether we have the required skills and talents in the working population. A huge expansion in apprenticeships linked to the construction sector has to occur, potentially at the expense of some of the more marginal universities and courses. Media studies at third rate universities will rarely justify the student loan.
Economy
The UK economy has returned to relative stability following the disruptions caused by Brexit, the COVID-19 pandemic, the Ukraine crisis and the now not to be criticised mini-Budget. Economic stagnation has somehow delivered stable employment rates and rising wages, which have maintained a reasonable degree of consumer confidence. This has meant that on average, UK house prices have continued to rise over these stress periods despite there being some regional variations. However, inflation has been a significant challenge, influencing the Bank of England’ s interest and monetary policy and consequently mortgage interest rates.
With the Bank of England Base Rate unlikely to fall from its current 4.75 % to below 3 % at any point in the foreseeable future, interest rates are going to remain relatively higher than the historic lows experienced through the 2010s and the early 2020s. We will all have to get used to this. Higher interest rates have made mortgages more expensive, impacting the affordability of home loans.