Mortgages
Mortgage Rate Adjustments and Lender ActivityThe past week saw a mix of stability and slight adjustments in mortgage rates. Major lenders like Santander announced reductions starting April 4, lowering two-year fixed-rate first-time buyer mortgages at 60% loan-to-value (LTV) by 0.07%, while five-year fixes at 90% and 95% LTV dropped by up to 0.12% and 0.3%, respectively. However, some lenders, including HSBC, raised rates slightly, with five-year fixes climbing from 4.07% to 4.15%, pushing sub-4% deals off the table. Halifax and Nationwide held steady, offering five-year rates at 4.17% and two-year rates at 4.34% (both 60% LTV), reflecting a cautious market response to the Bank of England’s decision to hold the base rate at 4.5% on March 20.
Impact of Stamp Duty ChangesThe expiration of the stamp duty concession on March 31, 2025, reducing the first-time buyer threshold from £425,000 to £300,000 and the standard nil-rate band from £250,000 to £125,000, dominated the mortgage landscape. This triggered a rush of completions in late March, with approvals dipping to a six-month low as buyers pulled back post-deadline. The increased tax burden has heightened affordability concerns, particularly for first-time buyers, prompting lenders like Santander to ease stress tests earlier in the month, allowing some to borrow up to £35,000 more, though this hasn’t fully offset the policy shift’s impact.
Economic and Policy ContextThe Bank of England’s decision to maintain the base rate at 4.5%, coupled with the Spring Statement on March 25 offering no new buyer support, has kept mortgage rates elevated. Inflation at 2.8% in February (down from 3% in January) remains above the 2% target, reducing expectations of imminent rate cuts. Posts on X and reports suggest mortgage interest rates could rise by 1% per the Office for Budget Responsibility’s forecast, adding pressure on borrowers. This uncertainty, alongside global trade tensions from U.S. tariffs, has led to week-by-week rate fluctuations, with two-year fixed rates showing the most significant year-on-year cuts, per Rightmove.
Market Sentiment and Buyer BehaviourHomeowner sentiment has been mixed, with millions facing a “nasty shock” as 1.8 million fixed-rate mortgages mature in 2025, potentially at higher rates than their initial deals. The return of zero-deposit mortgages, highlighted by a Telegraph story of a Manchester buyer, signals renewed lender interest in riskier lending, though such deals remain niche (6.6% of Q4 2024 mortgages had 10% or lower deposits). Meanwhile, a record number of homes for sale offers buyers leverage, but mortgage approvals fell ahead of the tax rise, reflecting caution as affordability constraints bite harder post-stamp duty changes.
Housing
House Price Stagnation Post-Stamp Duty DeadlineThe UK housing market saw a notable slowdown in activity following the stamp duty threshold reduction on April 1, 2025, with the first-time buyer threshold dropping from £425,000 to £300,000 and the standard nil-rate band falling from £250,000 to £125,000. Nationwide Building Society reported no month-on-month house price growth in March, with the average price holding steady at £271,316, a stark contrast to February’s 0.4% rise. Annual growth remained at 3.9%, but the lack of momentum reflects a post-deadline lull as buyers digest higher tax costs, particularly in London, where prices grew by just 1.9% year-on-year—the weakest regionally.
Regional Disparities and Market ResilienceDespite the national stagnation, regional variations persisted. Northern Ireland led with a 13.5% annual price increase, driven by strong demand, while the Northeast saw 9.1% growth in the year to January, per the Office for National Statistics (ONS). Posts on X and Nationwide data highlight resilience in certain areas, supported by low unemployment and real wage growth outpacing inflation (6% vs. 2.8% in February). However, affordability challenges and high mortgage rates (averaging 4.5%-5%) have dampened activity, with transactions falling 1% from December 2024 to January 2025, per HMRC.
Supply Surge and Buyer LeverageThe housing supply reached a decade-high, with Rightmove noting a significant increase in listings—up 26% from Boxing Day 2023 to 2024—continuing into Q1 2025. This glut, partly fuelled by second-home owners selling before the April 1 double council tax rule, has shifted the market in favour of buyers. The Guardian and Proactive Investors reported a rush to complete sales before the stamp duty deadline, followed by a drop-off, with semi-detached homes showing the strongest annual growth (4.8%) amid a broader softening expected in the coming months.
Policy and Economic InfluencesThe Spring Statement on March 25 offered no immediate housing stimulus, though £2 billion in funding for 18,000 new homes (half social housing) was announced earlier in the week, targeting completion by 2029. The Office for Budget Responsibility (OBR) forecasts planning reforms will boost housebuilding by 170,000 homes by 2029/30, but short-term growth remains elusive, with a 13-year low projected for 2025-26. The Guardian noted stagnant prices alongside warnings of a “soft” market ahead, as high interest rates and the end of tax reliefs weigh on sentiment, despite optimism from some X posts about underlying demand in the South.
Property Development
Spring Statement Drives OptimismThe Spring Statement on March 25, 2025, continued to reverberate through the property development sector this week, with Chancellor Rachel Reeves’ planning reforms gaining traction. The Office for Budget Responsibility (OBR) forecasts these reforms—reintroducing mandatory housing targets and easing green belt restrictions—will boost housebuilding to a 40-year high, delivering 1.3 million homes by 2029/30, including an extra 170,000 homes over five years. Developers welcomed the £2 billion funding injection announced earlier in the week for 18,000 new social and affordable homes, though some, like Pocket Living’s CEO Paul Rickard, emphasized the need for more resources to fully realize these ambitions.
Stamp Duty Hike Impacts MomentumThe stamp duty threshold reduction on April 1—from £425,000 to £300,000 for first-time buyers and £250,000 to £125,000 for others—has cast a shadow over housebuilding momentum. A pre-deadline surge saw February sales jump 28% year-on-year to 108,250, per HMRC, as buyers rushed to complete, but activity slowed sharply this week. Developers fear the higher tax burden could dampen demand, particularly for new builds, despite 53% of movers now considering new homes (up from 47% last year), according to Property Academy data. The Home Builders Federation reiterated calls for urgent buyer support measures to sustain construction pipelines.
Regional Projects and Investments AdvanceProperty development activity showed resilience in specific regions. Network Rail’s plan to establish a property company, announced last week, progressed with details emerging of 40,000 homes planned over a decade, including 5,000 at Newcastle Forth Yards and 1,500 at Manchester Mayfield. Meanwhile, UK Land Estates’ £35 million investment in 270,000 sq ft of industrial space in the Northeast, reported earlier, continued to draw attention as a speculative build model. However, local opposition persisted elsewhere, with Whitstable’s 220-home estate approval last month still sparking debate this week over coastal view impacts.
Economic and Policy HeadwindsGlobal economic pressures, notably U.S. tariffs (25% on car imports effective late March and a potential 20% on UK exports by April 9), raised concerns about rising construction costs, potentially squeezing developer margins. The OBR’s forecast of a 13-year housebuilding low in 2025-26 before the 2030 peak underscored short-term challenges, while £600 million to train 60,000 construction workers, announced pre-week, aimed to address skills shortages. Sentiment on X and industry reports reflected cautious optimism, tempered by warnings from the Resolution Foundation of a “soft” market ahead, as developers balance policy support with economic uncertainty.
Economy
Economic Growth Forecasts Revised DownwardThe Office for Budget Responsibility (OBR) released its latest Economic and Fiscal Outlook on March 26, forecasting UK economic growth at just 1% for 2025, half the 2% predicted in October 2024. This downgrade, highlighted in posts on X and official reports, reflects a stalling economy in late 2024, with temporary factors like global trade tensions and higher borrowing costs cited as drags. Growth is expected to recover to an average of 1.75% from 2026, but the near-term outlook remains subdued, adding pressure on Chancellor Rachel Reeves post-Spring Statement.
Trump Tariffs Threaten Trade StabilityThe looming threat of U.S. tariffs under President Donald Trump dominated economic news this week. Announced measures include a 25% tariff on car imports (effective late March) and a potential 20% levy on UK exports by April 9, per The Independent and BBC. The OBR warns that a full trade war could shrink UK GDP by 1%, with No. 10 acknowledging impacts on exporters like steel and auto sectors. Talks for a UK-US “economic prosperity deal” continued at pace, with Keir Starmer adopting a calm stance, though confidence among business leaders, as noted by the Institute of Directors, remains near pandemic lows.
Spring Statement Fallout and Fiscal TightropeThe Spring Statement on March 25 aimed to restore fiscal headroom, achieving a £9.9 billion buffer against borrowing rules, per Reeves’ Bloomberg interview. However, the Institute for Fiscal Studies cautioned that this margin is slim amid risks like rising gilt yields (4.8% for 10-year bonds) and a weakening outlook, potentially forcing tax hikes in autumn. Cuts to welfare (£5bn) and stagnant growth sparked criticism on X and from think tanks like the Resolution Foundation, predicting £500 living standards drop for poorer households over five years, underscoring economic vulnerability.
Mixed Signals from Business and ConsumersDespite the gloom, pockets of resilience emerged. Next reported a landmark £1 billion annual profit on March 27, defying retail challenges, per The Guardian, while the Ramadan economy was valued at up to £1.3 billion, outpacing GDP growth, according to Hyphen. Conversely, Sky’s plan to cut 2,000 jobs, reported by GB News, signalled corporate caution, and consumer confidence wavered as inflation held at 2.8% (above the 2% target), per ONS data. Posts on X noted some optimism from falling mortgage rates and wage growth, but the overriding narrative is one of uncertainty amid global and domestic pressures.
To discuss everything mortgages and property finance with an FCA regulated mortgage broker please send an email to [email protected] or contact the Bristol head office online or on 0117 989 7950.
