Where the market stands — and where it’s headed

Where the market stands — and where it’s headed

The UK housing market has spent 2025 in a holding pattern: prices that are broadly flat-to-modestly up, activity that recovered through the spring and summer but looks cautious again as the Autumn Budget approaches, and mortgage lending that shows stronger pipeline commitments even as monthly advances and approvals bounce around. Below is a short, data-backed read of what’s happened recently, why, and a grounded 12-month outlook with practical takeaways for buyers, sellers and investors.

• House prices: Average UK house prices are up modestly year-on-year — in the region of 2–4% depending on the index — with the official ONS/HPI and major lenders showing growth but a clear regional split (stronger in much of the North and parts of Scotland, weaker in parts of the South and London).

• Mortgage approvals: Net mortgage approvals for house purchases are around 64–65k per month in mid-2025 (August: 64.7k), a touch lower than the summer peak but close to pre-pandemic norms. That number is an indicator of near-term transactions.
What’s been driving the market recently

1. Higher-for-longer (but easing) borrowing costs. After a period of very high borrowing costs, the Bank of England trimmed Bank Rate to 4% and has signalled cautious easing; markets and borrowers still price a slow path of rate cuts. That keeps mortgage costs meaningful for many buyers and acts as a brake on exuberant price growth.
2. Still-elevated inflation and wages dynamics. Inflation remains above target, around 4% in recent months, which complicates the Bank of England’s ability to cut aggressively. At the same time, stronger wage growth in some sectors supports affordability for certain buyer segments.
3. Regional divergence. Outside the South-East and London many areas including parts of the North, Scotland and the Midlands continue to see modest gains — partly driven by local affordability, rentals and demand from remote/hybrid workers. London and some commuter belts have been more subdued year-on-year.
4. Policy and fiscal uncertainty. Speculation about the Autumn Budget (possible property tax / revenue measures) has encouraged some buyers and sellers to pause, denting short-term activity. Media and market commentary have repeatedly flagged caution ahead of the Budget.

Read the data: what it implies for transactions and mortgages

• Approvals in the mid-60k/month area imply transaction volumes are not collapsing — they’re close to the long-run averages — but movement is incremental rather than explosive. If approvals drift down, we should expect sales to follow.
• Commitments vs advances. Higher commitments (agreements in the pipeline) alongside lower gross advances suggest timing frictions: deals agreed but taking longer to complete (e.g., due to surveys, legal delays, remortgage timing). It can also reflect a seasonal pattern.

Forecast — next 12 months (Oct 2025 → Oct 2026)
Below I give a baseline, downside and upside forecast plus the probability I’d attach to each. These are short-horizon, pragmatic scenarios — not precise point predictions — and are anchored to current data (HPI, BoE, Halifax/Rightmove). Sources and reasoning above feed these views.

Baseline (most likely) — 50% probability
• House prices: +1% to +4% year-on-year (UK average) by Oct 2026. Modest growth as inflation slowly eases, a limited number of further small BoE cuts (maybe into early 2026), and steady buyer demand support prices. Regional divergence persists (North/Scotland outperform; London/suburban South lag).
• Mortgage approvals: Monthly approvals roughly 55–70k (average 65k), with seasonal swings. Remortgage activity may pick up when borrowers exit fixed deals or if a clearer cut on BoE rates arrives.
Downside (risk) — 25% probability
• House prices: -3% to 0% across 12 months. Triggered if the Autumn Budget introduces material property taxes or if inflation resurges forcing the BoE to pause cuts / hike again; buyer sentiment and activity fall and approvals decline.
• Mortgage approvals: Fall below 50k/month if lender appetite tightens or affordability worsens.
Upside (optimistic) — 25% probability
• House prices: +4% to +8% over 12 months. Triggered by clear cuts from the Bank of England (faster than expected), steady wage growth, and fiscal moves that support consumer confidence — leading to a pick-up in buyer activity and higher approvals. This would likely be uneven geographically.

What to watch next (data & events that will move the market)
1. Autumn Budget (26 Nov 2025) — any property tax or stamp-duty measures will affect sentiment.
2. Monthly approvals & HPI releases (BoE Money & Credit, ONS/HPI, Halifax/Nationwide) — these show whether pipeline activity converts to completed sales and whether price momentum is accelerating or fading.

Practical takeaways
• Buyers (first-time & movers): mortgage rates are lower than the peak but not back to ultra-cheap levels — shop around, fix a rate if you find a comfortable deal, and build a buffer for repayments if inflation surprises. If you’re city-priced, consider regional alternatives where affordability is better.
• Sellers: expect demand to be selective — pricing competitively and having a clear sale plan (e.g., a short chain) will help. Watch Budget announcements and local market momentum.
• Landlords/investors: rental inflation remains strong in many regions (supporting yields) but weigh regulatory and tax risk from potential fiscal changes.
• Re-mortgagers: a clearer path to future rate cuts would favour waiting only if your fixed deal is short dated; otherwise, locking a good mid-term fixed rate can protect budgets from volatility.

The Bottom line
The UK housing market in late-2025 is steady but cautious — prices are broadly positive on an annual basis, approvals sit near long-run norms, and lenders have a healthy pipeline. The near-term direction will be driven by two things: what the Autumn Budget does to sentiment and taxes, and how quickly inflation falls enough for the Bank of England to cut rates further. Absent large fiscal shocks or a renewed inflation surge, expect gentle price growth with clear regional winners and losers rather than a big national move.