New Year Mortgage Trends: What Homebuyers Need to Know
As the new year begins, there will be an anticipated a flurry of activity in the property market affecting both buyers and sellers. With changes to stamp duty thresholds on the horizon and lenders looking to attract buyers, January could set the stage for an exciting season.
Stamp Duty Changes: Why Timing is Key
From April 1, 2025, the threshold for paying stamp duty will be halved from £250,000 to £125,000- and first-time buyers will only be exempt up to £300,000 rather than £450,000. Therefore, the savings could be substantial for those who can complete their purchases before this deadline.
According to The Times (Jan,2025) – the property portal Zoopla reports that 283,000 property transactions worth £104 billion were in progress at the end of 2024, marking the busiest end-of-year period in four years. This surge they believe is driven by buyers eager to capitalise on the current stamp duty thresholds.
Mortgage Rates: A Winter Price War?
Industry experts suggest that lenders may kick off 2025 with competitive mortgage rates to entice buyers. Andrew Montlake of Coreco shared with The Times (Jan 2025) that banks might introduce “winter-warmer rates” to capture market share as buyers rush to complete deals before the stamp duty changes.
Mortgage brokers are optimistic about the year ahead, with UK Finance projecting an 11% increase in gross mortgage lending to £260 billion and the Intermediary Mortgage Lenders Association (IMLA) forecasting a 16% rise to £275 billion.
Historical Trends and What to Expect
In 2024, a mortgage price war led to the average two-year fixed rate dropping from 5.87% to 5.59% within a month. Similarly, five-year fixed rates fell from 5.46% to 5.23%. These reductions translated into significant savings for buyers. While rates fluctuated throughout 2024, the Bank of England’s decision to lower its base rate in August provided relief after nearly two years of increases.
Looking ahead, the Bank of England is predicted to cut its base rate currently at 4.75% as many as four times in 2025, with the first reduction anticipated in February. However, potential buyers should be cautious experts warn that these cuts are already factored into existing mortgage rates so that further reductions may be limited.
Why Auctions Are the Smart Choice Right Now
With all this market activity, buying or selling through property auctions offers several key advantages:
- Speed of Sale: Contracts are binding at the fall of the gavel and completion typically happens within 28 days. This is perfect for buyers and sellers looking to meet the April 1st stamp duty deadline.
- Transparency: All bids are visible at a Livestream auction so buyers can see exactly the prices that they are competing against. Sellers benefit from knowing that the final sale price reflects actual market demand.
- Competitive Pricing: Auctions often attract multiple bidders, increasing sellers’ prices. At the same time, buyers may find properties priced lower than those in traditional sales, mainly when sellers are motivated to complete quickly.
- Certainty of Completion: Unlike private treaty sales, where deals can fall through, auction sales are legally binding. This gives both buyers and sellers peace of mind in an unpredictable market.
- Expert Guidance: Auction houses like Auction House London offer expertise and support, helping buyers and sellers confidently navigate the process.
Can You Buy at Auction with a Mortgage?
Yes, you can purchase a property at auction with a mortgage, but there are essential factors to consider:
Pre-Approval is Crucial: Before bidding, ensure your mortgage lender has approved your loan in principle. This will give you clarity on your budget and confidence to bid.
The Deposit Requirement: At auctions, buyers must pay a deposit typically 10% of the purchase price and any associated fees immediately after winning the bid. Ensure you have this amount readily available.
Tight Completion Deadlines: Auction sales require completion within 28 days, so your mortgage application must be processed quickly. Work with lenders familiar with auction purchases and provide all necessary documents promptly. Our team at Auction House London have preferred providers who can assist you with this.
Property Suitability: Lenders will assess your purchasing property. Homes in poor condition or with structural issues might be deemed unsuitable for a mortgage. Always review the property’s legal pack and carry out an appropriate survey beforehand.
Buying at auction with a mortgage is entirely achievable by planning and understanding the process. Many buyers successfully navigate this route to secure their dream properties or lucrative investments.
Preparing for 2025
Whether you’re a buyer or seller, staying informed and acting strategically is essential. If you want to secure a property or take advantage of competitive mortgage deals, now is the time to start your search.
At Auction House London, we’re here to help you navigate the fast-paced property market. From expert advice to a wide range of properties going under the hammer in our first Auction, we will ensure you’re ready for whatever 2025 brings.
Click the links to secure a valuation or to preview our current lots as we start to list for our February Auction.