Property prices are predicted to jump 4% in 2025. Here’s what could mean for you
Over the last few decades, property prices have soared. Despite concerns about affordability for younger generations, experts predict that the value of the average home will continue to rise in 2025. As a homeowner, that could be welcomed news and might even reduce your mortgage repayments.
According to the Land Registry, the value of the average home in the UK in January 2005 was £138,759. Over the last 20 years, there have been times when the value fell, but overall, it’s been an upward trend.
Indeed, in January 2025, the average home was worth £268,087 – an increase of more than 90% in just two decades.
Source: Land Registry
So, it’s not surprising that for many people, property is among the largest assets they own, but what’s in store for the property market in the coming year?
Predictions suggest that while the pace of house price rises might slow, homeowners will still benefit.
Savills predicts house prices will rise by more than 23% over 5 years
Across all of the UK, estate agents Savills predicts that property prices will rise by an average of 4% in 2025. It expects a similar trend over the next five years, leading to prices rising by 23.4% from 2025 to 2029.
However, there are significant regional differences.
For example, central London property prices are predicted to grow by just 9.6% over the next five years. In contrast, the north-west and north-east are expected to lead in terms of growth, experiencing property prices rising by 29.4% and 28.2% respectively.
So, if these predictions are accurate, the value of your home could be set to rise over the coming years. That could be good news for your finances.
Rising property values could reduce your mortgage interest rate
The interest rate you’re offered when taking out a mortgage has a direct effect on the cost of borrowing and your regular repayments.
Several factors affect the interest rate a lender will offer you. This includes factors you have no control over, such as the Bank of England’s base rate and factors you can control, like how much debt you have.
Another area that often affects interest rates is your loan-to-value (LTV) ratio. This compares the outstanding balance of your mortgage with the value of your home. As a result, your LTV will usually fall as you make mortgage repayments or the value of your home increases.
Mortgages with a lower LTV are often viewed as less of a risk by lenders. This is because there’s less chance of them losing money if you default on mortgage repayments. As a result, you’ll typically be offered a lower interest rate if you move into a lower LTV bracket.
A lower loan-to-value ratio could save you thousands of pounds
According to Moneyfacts, in February 2025, the most competitive interest rate for a two-year fixed-rate deal with a 90% LTV was 4.73%. In contrast, the best deal for a homeowner with an LTV of 60% searching for a two-year fixed-rate deal in terms of the interest rate was 3.99%
That difference might seem small, but it can really add up over the full term of your mortgage.
Let’s say you’ve borrowed £200,000 through a repayment mortgage with a 25-year term. If your mortgage had an interest rate of:
4.73% your monthly repayment would be £1,138 and you’d pay interest of £141,251 over the full mortgage term
3.99% your monthly repayment would be £1,054 and you’d pay interest of £116,250 over the full mortgage term.
So, even though the interest rate is less than a 1% difference, the lower rate could save you more than £25,000 in the long term.
If your mortgage deal is coming to an end, it’s worth checking how the value of your property has changed – it might just cut your outgoings and boost your long-term wealth.
Contact us to review your mortgage
If you’re searching for a new mortgage deal and would like guidance, please contact us. As mortgage brokers, we can work with you to assess your LTV and search the market for a competitive deal that suits your needs.
Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.