How to plan your next move in the property market with changing mortgage rates

By Mark Lawrinson - 14 November 2024

As the property market has continued to adjust over the past 24 months in the aftermath of economic policies, navigating mortgage rates has become a critical consideration for both homeowners and prospective buyers.

The rise in the base rate over the past 18 months has led to uncertainty, but, following a recommendation by the IMF (International Monetary Fund) earlier this year, a reversal is already happening. With inflation at sub two percent, we can expect a large drop in rates to as low as 3.5% by the end of 2025.

Mark Lawrinson MNAEA MARLA, Operations Director, Residential Sales at Beresfords Group and Director at Flagstone Financial, said: “For those planning their next property move, staying informed and strategic is essential. Lower mortgage rates present opportunities, but careful planning is key with ongoing inflationary pressures and fluctuating house prices. Whether you’re looking to sell, buy, or remortgage, this blog lists five important considerations to help you make the best decisions in today’s shifting market.”

 Stamp Duty, or more specifically Stamp Duty Land Tax (SDLT) as it’s known, is a tax that any purchaser must pay when buying a property and the tax is based on a percentage of purchase price, which currently stands at:

 £0-£250,000 @ 0%

£250,001-£925,000 @ 5%

£925,001-£1,500,000 @ 10%

£1,500,001+ @ 12%

However, these rates are changing from 1^st April 2025.

Stamp Duty relief was introduced to enable first-time buyers to get onto the property ladder and in essence, it raised the initial threshold where 0% Stamp Duty would be paid, up to £425,000, enabling most purchasers to pay 0% Stamp Duty on their first home.

Currently, first-time buyers will pay 0% up to a purchase price of £425,000 providing the property they are purchasing is worth less than £625,000.  They would then pay 5% on the difference between £425,000 and £625,000 should their first home be within this value bracket.  

Post 31^st March 2025, first-time buyers will pay 0% Stamp Duty up to the value of £300,000, so a reduction of £125,000 on the tax-free amount and they will then pay 5% on the portion of £300,001 to £500,000.

These new rules mean that for first-time buyers, should they be purchasing a house for £500,000 that completes before 31^st March 2025, they will pay a total of £3,750.  However, post 31^st March 2025, should they complete on a property based on the new Stamp Duty tax bandings for first-time buyers, they would pay £10,000 on the same value property, thus an increase of £6,250.

No, it won’t.  This is relevant for purchasers and will affect first-time buyers but also normal purchasers, as the bandings are changing across the board from 1^st April 2025.  However, whilst it doesn’t affect existing property owners directly, it could have an impact on the market, as purchasers now need to factor in the change in Stamp Duty Land Tax costs to any purchase they are making.

You should move before 31^st March 2025 if you are a first-time buyer, as you will save a significant amount of money on the Stamp Duty Land Tax you will pay, providing you are purchasing a property for £500,000 or less.  Equally, if you are not a first-time buyer, the bandings are going to change as follows:

 £0-£125,000 @ 0%

£125,001-£250,000 @ 2%

£250,001-£925,000 @ 5%

£925,001-£1,500,000 @ 10%

£1,500,001+ @ 12%

Thus, normal purchasers will now have an additional cost that they don’t have prior to 31^st March 2025, of 2% on the amount of £125,001 to £250,000 of the purchase price. As such, this will be an increase to anybody’s Stamp Duty costs, of £2,500.

Although mortgage rates have fluctuated since the Truss/Kwarteng ‘Mini-Budget,’ they haven't reached the extreme highs of 9% as predicted in some reports. We believe that, over the coming months, we could see the Bank of England bring the base rate as low as 3.5%. As a result, lenders may start offering rates as low as 3%, giving buyers a more favourable window. Monitoring these shifts is crucial when timing your move.

Despite market volatility, mortgage providers remain competitive. Lenders need to continue offering attractive products to stay profitable, which means that even in a tighter market, there are often deals to be found. Engaging with a mortgage advisor, like our team at Flagstone, can help you navigate the various options and find a product that suits your circumstances, whether you're buying or remortgaging.

With the potential for interest rates to drop over the next year, the decision between locking in a fixed-rate mortgage or opting for a variable rate becomes more significant. A fixed-rate mortgage provides stability, but as rates lower, a variable rate could offer better savings. Predominantly, we are used to seeing five-year fixed mortgages as more favourable, but we may start to see a switch to two-year fixed mortgages becoming more popular. It’s important to assess your risk tolerance and financial plans before deciding.

As interest rates change, so too do house prices. Historically, falling mortgage rates can drive up property demand, leading to price increases in certain areas. If you’re planning to sell and buy a property in Essexagain, consider how local market conditions and upcoming rate changes might impact your buying power. Doing market research on areas experiencing growth or stagnation can help you make a smarter choice.

Even with optimistic projections for lower rates in 2025, it's important not to overextend yourself. Inflationary pressures are still a concern, and with the need to maintain economic stability, rates may not drop as dramatically as hoped. Setting a budget that accounts for both current and future potential market changes is key to ensuring you can sustain your financial commitments over time.

As the property market continues to shift, staying informed and adaptable is crucial to making the right decisions. While the potential drop in mortgage rates offers exciting opportunities, it’s important to balance short-term gains with long-term financial security. By carefully considering market trends, lender competition, and your own financial goals, homeowners and potential buyers will be best positioned to make the most of this evolving landscape.

Beresfords is Essex’s largest family-owned independent property group and have been successfully operating for over 50 years. Established in 1968 by RD and EG Beresford as an independent estate agency practice in Upminster, our current CEO Paul Beresford joined the original office in 1975. 

Since then, the Group has grown into a number of specialist property areas, including sales, lettings, new homes, land, financial services and surveys across the South-East. Those original key values are the bedrock of the Company. As a constantly developing agency, we have combined traditional principles with innovative marketing techniques, bringing us to the forefront of property marketing.