House asking prices have seen a sharp rise in January, with an average increase of £5,992—or 1.7%—from December. This marks the biggest “New Year bounce” since 2020, with the typical home now listed at £366,189, according to Rightmove. However, despite the uptick, asking prices are still nearly £9,000 lower than the peak seen in May 2024, showing that buyers are still feeling the pressure of tighter budgets.
While this recent rise might seem encouraging, there are signs that price increases could slow down as 2025 progresses. Rightmove reports that the number of new properties entering the market has risen by 11% compared to the same period last year, meaning buyers will have more options to choose from. Sellers will need to adapt to the increased competition and price their homes more strategically to attract offers.
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How Much Can You Borrow?
If you’re considering entering the market, you might be wondering just how much you could borrow based on your finances. Our How Much Can I Borrow calculator is a great tool to help you understand your mortgage potential before you start house hunting. With varying mortgage rates and borrowing criteria, having an idea of your budget can give you an edge when navigating the competitive market.
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Impact of Mortgage Rates on Affordability
Rightmove’s Colleen Babcock suggests that sellers may need to lower their asking prices to stand out, especially as mortgage rates continue to squeeze buyers’ borrowing power. With the Bank of England’s future interest rate cuts uncertain, many buyers are still facing affordability challenges. Mortgage rates are expected to stay between 4.5% and 5% for the near future, and higher fixed rates continue to limit the borrowing potential for many.
Current Mortgage Rates and What They Mean for Buyers
Increased mortgage rates are one of the main factors influencing the housing market right now. Currently, buyers are securing rates of around 4.75% on five-year fixed mortgages and 4.97% on two-year fixes. For example, a £300,000 mortgage over 25 years with a 4.75% fixed rate would cost the average buyer £1,748 a month.
This higher cost of borrowing means that many buyers’ affordability is limited, making it more difficult to stretch their budgets for higher-priced homes. If you’re feeling the pinch from current mortgage rates, you’re not alone. Understanding what you can afford now is crucial for making informed decisions.
What Does 2025 Hold for Buyers and Sellers?
While buyers face tighter budgets, sellers will need to be strategic about their pricing. As competition in the housing market intensifies, sellers are likely to face challenges in maintaining high asking prices. Babcock recommends that sellers heed the advice of their agents and consider offering competitive pricing, standout features, or immaculate home presentation to make their listings more attractive to potential buyers.
For buyers, though demand remains strong, the desire for stability is key. As interest rates fluctuate and economic uncertainties loom, many are taking a more cautious approach to buying a home. However, the underlying desire to move remains intact, with more properties coming to market providing fresh opportunities.
Need Help Navigating the Market? Start with Our Mortgage Calculator
At Contractor Mortgage Solutions, we specialize in helping contractors navigate the mortgage process. Whether you’re a first-time buyer or looking to remortgage, our expert team is here to ensure you get the best deal for your circumstances. Start by using our How Much Can I Borrow calculator to get a clearer idea of your borrowing power today. Ready to make your move? Contact us for personalized mortgage advice that works for you!